Factors Influencing Quantity Supplied
1. Prices of other goods
An increase in the price of other goods produced with the same resources will make the supply of a good whose price does not rise less attractive to suppliers. They will shift to produce the highly priced goods to maximize profits e.g. move from fresh milk to yoghurt.
2. Cost of making the good
This depends on the prices of factors of production, that is, wages, interest rates, land rents, price of raw materials and profit expectation. Generally if the cost increases, supply falls and vice versa. On the other hand, a rise in the price of one factor, say labour, will cause producers to shift from supplying goods whose production is related to labour and supply goods where labour use is less significant.
3. Changes in Technology
Technological developments and innovations reduce the costs of production and increase productivity hence raising the quantity of a good supplied even with the same or less inputs.
4. Weather
Changes in the weather of a region may affect the supply of a commodity. This is mostly related to agricultural products (drought or good weather)
5. Discoveries
If new raw materials such as oil are discovered, output is bound to increase because the inputs will be available cheaply.
6. Government Regulation
The government can control the amount of a good supplied/produced through quota system, embargo, tax and subsidies.
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