Supply
Supply refers to the quantity of commodity a which is offered for sale by its producer at a give price at a period of time. Simply, it is the quantity a commodity that a seller is willing and able to offer for sale over a given time period.
Determinants of Supply :
The factors that causes the change in supply of a commodity are known as determinants of supply. The major determinants of supply are:-
I ) Price of the Commodity :
Other things remaining the same , the quantity supplied of a commodity increases with the rise in price and vice versa .
i.e. there is a direct relationship between price of a commodity and its quantity supplied, other things remaining the same.
II) Price of Other Goods:
The supply of a particular commodity is inversely interrelated with the price of other commodity. For example the supply of wheat falls when there is rise in the price of rice. This is because due to the rise in price of rice, the producer are encouraged to produce more rice than wheat.
III) Goal of the Firm:
If the goal of the firm is to maximize profit, the less quantity of commodity will be offered for sale and if the goal of the firm is to maximize his revenue, the more quantity of goods will be supplied even at low price.
IV) Improvement in Technology :
Improvement in technology reduces the per unit cost of production. As a result, a firm can produce more quantity of a commodity at the lower cost .
V) Price of the Factors of Production :
When there is rise in the price of factors of production, the cost of production will also rise. Due to which producers are unable to produce more goods andservices.
VI ) Government Policy :
Taxation and subsidy policy of the government also affect the market supply of a commodity. Increase in the taxation leads to the reduction in the supply of the commodity because higher taxation discourages the producers to produce more goods and services. On the other hand, subsidy leads to increase in the supply of commodity .
VII) Number of Firms :
When there is increase in the number of firms it leads to the increase in the market supply of the commodity . On the other hand, decrease in the number of firms leads to decrease in the supply of the commodity.
VIII) Expected Future:
When the producers expect the rise in the price of the commodity in near future, the current supply of the commodity decreases.
IX) Infrastructural Development :
The supply of the commodity depends on the level of development of of transportation communication, electricity, etc.
X) Natural Factors:
Supply of the commodity also depends on the natural factors such as rainfall. If there is unfavourable natural factors like heavy rainfall, storm, flood, landslides, etc it hinders the agricultural production which leads to increase in supply . On the other hand, favourable factors such as adequate rainfall at time increases the supply of agricultural production.
Chapter 2 Part 11
