write any five causes of increase in suppy
Answers
ΔŇŞŴ€Ř
A decrease in costs of production. This means business can supply more at each price. ...
More firms. An increase in the number of producers will cause an increase in supply.
Investment in capacity. ...
Related supply. ...
Weather. ...
Technological improvements. ...
Lower taxes. ...
Government subsidies.
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1.Improvements in technology:
This influence is closely related to the previous one, since improvements in technology raise the productivity of capital, reduce costs of production and result in an increase in supply. It has become much cheaper to produce a range of products due to the availability of more efficient capital goods and methods of production.
For instance, whilst world demand for personal computers has increased in recent years, the supply has increased even more as it has become easier and cheaper to produce them. Fig. 3 shows these changes and the resulting fall in price.
2.Subsidies:
A subsidy given to the producers provides a financial incentive for them to supply more. Besides being paid by the consumer, they are now being paid by the government also. As a result, the granting of a subsidy will cause an increase in supply whilst the removal of a subsidy will cause a decrease in supply.
Most countries, throughout the world, subsidies some agricultural products. A number of them also give subsidies to new and important industries. Less frequently, a government may also give a subsidy to consumers, to encourage them to buy a particular product. For example, grants may be given to households to enable them to buy houses. In this case, of course, it is demand and not supplies conditions which change.
3.Weather conditions and health of livestock and crops:
Changes in weather conditions affect particular agricultural products. A period of good weather around harvest time is likely to increase the supply of a number of crops. Very dry, very wet or very windy weather, however, is likely to damage a range of crops and thereby reduce their supply.
The amount of agricultural products produced and available for supply is also influenced by the health of livestock and crops. The outbreak of a disease, such as foot and mouth in cattle or blight in crops, will reduce supply.
4.Prices of other products:
Firms often produce a range of products. If one product becomes more popular, its price will rise and supply will extend. In order to produce more of this product, the firm may divert the resources from the production of other products.
The prices of these other products have not changed but the firm will now supply less at each and every price. For example, if a farmer keeps cattle and sheep, a rise in the price and profitability of lamb is likely to result in the farmer keeping fewer cows and a corresponding decrease in the supply of beef.
Besides the products being supplied in a competitive environment, they can also be jointly supplied. This means that one product is automatically made when another product is produced i.e. one product is a by-product of the other one. For example, when more beef is produced, more hides will be available to be turned into leather.
In the case of products which are jointly supplied, a rise in the price of one product will cause an extension in supply of the other product. Firms make more of one product because its price has risen. The supply of the other product will increase automatically. More is produced, not because it has risen in price but because the price of a related product has risen.
5.Disasters and wars:
Natural disasters, such as hurricanes, floods and wars, can result in a significant decrease in supply. The Tsunami, for instance, that hit Sri Lanka and other South Asian countries in December 2004 destroyed hotels, damaged beaches and killed the staff working in hotels. As a result, the supply of hotel accommodation decreased.