How is the supply of a commodiify affected by an increse in price of other related goods explain
Answers
HERE COMES IN THE PORTER’S FIVE FACTORS OF MARKET RIVALRY. THE FACTORS ARE BUYERS POWER, SELLERS POWER, THREAT OF NEW ENTRY, SUBSTITUTE PRODUCTS, CONCENTRATION OF RIVALRY. WHEN I PRODUCT HAS RELATIVELY LARGE MARKET SHARE AND HIGH PROFIT MARGIN (MONOPOLISTIC COMPETITION) , OTHER FIRMS GET INTERESTED TO ENTER IN THE MARKET. IF THE BARRIERS OF ENTRY ( LARGE CAPITAL, GOVT. REGULATION, PATENT, COPY RIGHT, SPECIALISED EQUIPMENT, CUTOMER’S LOYALTY ETC) ARE RELATIVELY WEAK, FEW FIRMS ENTER IN THE MARKET AND SELL THE SIMILAR PRODUCTS. NOW AS THE CUSTOMERS HAS WIDE CHOICE OF PRODUCTS DUE TO HOMOGENOUS PRODUCTS, FIRMS WILL COMPETE WITH OTHER AND PRICE WAR WILL START WHICH FORCE THE PRICE TO FALL . THE FIRMS WILL TAKE THE MARKET PRICE TO SELL AND EACH ONE HAS GOT CERTAIN PERCENTAGE OF MARKET SHARE, THIS IS THE WAY THE DEMAND OF THE PRODUCT GETS