When non price determinant causes increase in Supply?
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Answer:
The non-price determinants of supply include:
Price of related goods: An increase in the price of a related good can influence the supply of the original good. ... Subsidies → reduce costs → supply shifts right (more supply, cheaper price) other ways to intervene -exchange and interest rates.
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When the non-price determinants cause an increase in supply, it results in a shift in the supply curve.
Explanation:
- Supply can be defined as the number of goods that a seller is willing to sell at a given price at a specific point of time.
- The supply of a product can be influenced by various factors which are not related to its price.
- An increase in the price of substitute goods can result in an increase in the supply of a good.
- Likewise, an increase in the availability of raw material, or a decrease in the price of raw material can also increase the supply of a product.
- A profitable firm will also be supplying more products.
- All these factors result in an increase in supply which can be represented by a forward shift in the supply curve.
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