Q3Managerial Economics & Financial Accounting
Question
2 marks
What are the determinants of Supply?
Answer
Supply is determined by the good's own price, factor input prices, technology, government policies, and prices of related goods.
The main Determinants of Supply (factors that shift the supply curve) include:
1. Price of the Commodity: Higher price leads to higher supply (movement along the curve). 2. Cost of Factors of Production (Inputs): Higher wages or raw material costs decrease supply. 3. State of Technology: Technological advancements reduce costs and increase supply. 4. Government Policy: Taxes decrease supply, while subsidies increase supply. 5. Prices of Related Goods: If the price of a substitute in production rises, the supply of the current good may fall.