How do following factors influence the supply of a commodity ?
(a) Price of the commodity
(b) Technology of production
Answers
Answer:
Price of factor Inputs: If factor input price increases, cost of production generally rises, accordingly producers are willing to supply less at the existing price as the profit probability decreases
a) 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.
b) Technological changes influence the supply of a commodity. Advanced and improved technology reduces the cost of production, which raises the profit margin. It induces the seller to increase the supply.
Explanation:
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