Question

State two factors that govern the supply of commodities.

Answer 1

Two factors that govern the supply of commodities:

1) Goal of the firm: If goal of the firm is to maximize profits, more quantity of the commodity will be offered only at higher price. If goal of the firm is to maximize sales more will be supplied even at the same price.

2) State of technology: Improvement in the technique of production reduces cost of production. Consequently, more of the commodity is supplied at its existing price.