In this article, we will discuss what is meant by ‘Supply‘ in economics. Both from the perspective of an individual as well as the market. Afterwards we will discuss the ‘Determinants of Supply of a Commodity‘.
Explain the various determinants of supply of a commodity.
Definition of supply
The amount of a particular commodity the seller or producer prepare to sell at a fixed price and at a fixed time is called supply.
The amount of a particular commodity an individual seller prepare to sell at a fixed price and at a fixed time is supply of an individual.
The amount of particular commodity all the sellers in the markets collectively prepare to sell at a fixed price and at a fixed time is the total supply in the market.
Determinants of Supply of a Commodity
1) Price of the commodity: Supply of a commodity mainly depends on the price of that commodity. Generally, supply increases as a result of increase in price and supply decreases as a result of decrease in price.
2) Price of other commodities: Supply of any commodity is also dependent on the price of other commodities.
3) Price of the factors of production: Cost of production of the commodity is increased if the prices of the factors of production of that commodity is increased. As a result, the amount of supply of the commodity may decrease compare to the previous amount of supply.
4) Conditions of techniques for production: Cost of production changed due to change in techniques for production. As a result, amount of supply is also changed. For example, if cost of production is decreased due to improvement in techniques of production, the seller may increase the amount of supply compare to the previous amount of supply at a fixed price.
5) Objective of the producer or firm: If the objective of the firm or producer is to maximize sales instead of maximize profit then the amount of supply may increase compare to the previous amount of supply.
6) Conception of the seller regarding future price: The supply of a commodity is also influenced by the conception of the seller regarding future price of that commodity. For example, if the seller expects that the price of the commodity will further increase in future due to increase in price at present, then sellers will supply less amount of the commodity at present.
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