What are factors that affect supply

All QuestionsCategory: Secondary SchoolWhat are factors that affect supply
Flourish asked 2 years ago

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StopLearn Team Staff answered 2 years ago

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It is assumed that there are four main factors affecting the supply:

  • prices of alternative goods: when the prices of alternative good (alternative goods are meat and milk, for instance, as both goods can be produced by the same resources, i.e. cows, land, the same type of capital) increases, producers find it very profitable to increase it production and the supply increases
  • technology: when there is a technological progress in the production methods, producers become more productive and can produce more under the same quantity of factors, as a result the supply increases¬†
  • number of producers: when the number of producers increases, there are more suppliers in the market and the supply increases
  • producers` future expectations: when producers expect higher prices in the future, they may increase their production to earn higher profits in the future and as a result the supply increases (naturally, they could also cut down production in order to wait higher prices in the future, in this case the supply decreases)¬†

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