Determinants Of Supply
Economics notes
Determinants Of Supply
➡️ Supply is the amount of a good or service that producers are willing and able to provide at a given price.
➡️ The main determinants of supply are price, cost of production, technology, expectations, number of suppliers, and government policies.
➡️ Price is the most important factor in determining supply, as producers will increase supply when the price of a good or service rises.
➡️ Cost of production is also a major factor in determining supply, as producers will only supply a good or service if it is profitable to do so.
➡️ Technology, expectations, number of suppliers, and government policies can also affect supply, as they can influence the cost of production and the availability of resources.
What are the determinants of supply in economics?
The determinants of supply in economics include the cost of production, technology, government policies, natural disasters, and the number of suppliers in the market. These factors affect the quantity of goods and services that suppliers are willing and able to produce and sell at a given price.
How do changes in the cost of production affect supply?
Changes in the cost of production, such as an increase in the price of raw materials or labor, can decrease the supply of goods and services. This is because higher costs reduce the profit margins for suppliers, making it less profitable to produce and sell goods at the same price. As a result, suppliers may reduce their output or increase their prices to maintain their profit margins.
How do government policies affect supply in the market?
Government policies can have a significant impact on the supply of goods and services in the market. For example, taxes and subsidies can affect the cost of production and influence the quantity of goods and services that suppliers are willing and able to produce. Regulations and trade policies can also affect the supply of goods and services by limiting or promoting competition among suppliers. Additionally, government policies can affect the availability of resources and infrastructure, which can impact the production and distribution of goods and services.