Question

What are the causes of decrease in supply of goods and services?

Answer 1

Factors Responsible for Decrease in Supply of Goods and Services are:

1. Industrial Dispute: They lead to loss in the production of goods, leading to fall in supply and rise in prices.
2. Shortage of factors of production: This takes place when economy functions at full employment or close to full employment level and production of goods and services decreases.
3. Natural calamities: Floods, droughts etc. greatly affect the supplies of agricultural goods and products. Shortage of food products and their raw materials, lead to the reduction of industrial goods and it also raises the production cost.
4. Hoarding of goods: Some traders hoard essential goods in order to earn more profit. It leads to artificial scarcity of goods in the market and also puts a lot of inflationary, pressure.