CBSE Class 11-commerce Answered
Explain the factors that affect the supply of a commodity?
Asked by Likithkotte369 | 23 Feb, 2019, 10:52: AM
Expert Answer
Some of the factors that affect the supply of the commodity are:
- Price - One of the most important factor affecting the supply of a commodity is price. Price is directly related to the supply of a commodity. At higher prices the supply of a commodity increases. This increases the profitability of the producer.
- The supply of a product not only depends on its price but also price of other goods- The increase in price of the other good is more profiable the producer will shift production and increase the supply of that good.
- Inputs (Factors of Production)- With an increase in cost of production the firm is likely to reduce the supply of the product as it is less profitable for him.
- Improved technology- Advanced technology reduces the cost of production and therefore is more profitable for the producers and thereby induces them to increase supply of goods.
- Government policies- This is another important factor. Increase in governement taxes increases the cost to producers and this in turn makes them reduce the supply of their goods and charge higher prices to consumers.
Answered by Christina | 24 Feb, 2019, 07:06: PM
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