WHAT ARE DETERMINANTS OF SUPPLY OR FACTORS AFFECTING SUPPLY

FACTORS AFFECTING SUPPLY ARE:

1) Price: Price is one of the most important factor influencing supply. The quantity supplied depends upon the price of a commodity. Higher the price higher will be quantity supplied and the lower the price lesser will be supplied.

2) Technological advancement: Technological advancement in the production process leads to an increase in production as well as supply.

3) Cost of production: if the price of factors(raw materials, machinery, labours, etc) producing commodity increases then supply for a commodity will decrease and vice versa.

4) Government policy: Favorable government policy leads to an increase in supply whereas unfavorable government policy leads to a decrease in supply. Government policies in taxation, expenditure, or subsidy may encourage or discourage the quantity supplied.

5) Natural condition: Natural condition plays important role in determining supply. Mostly in the case of agricultural goods, natural conditions like good monsoon or good weather can increase agricultural output whereas unfavorable natural conditions can decrease agricultural output.

6) Future expectations: If the seller feels the price will rise in near future in that case seller will withhold stock with him. Whereas in case of a decrease in price in near future, the seller will clear present stock to earn more profit.

7) Other factors: Other factors also affect the supply. Factors like nature of the market, price of related goods, imports and exports of commodity, etc.