What Is Supply?
■ Supply of a commodity refers to the various quantities of the the commodity which a seller is willing and able to sell at different prices in a given market, at a point of time.
■ Supply is related to scarcity. Its only the scarce goods which have a supply price; Goods which are freely available have no supply price.
The Determinants of Supply
■ Price of good : since higher money income is necessary to induce producers to produce more, the amount supplied therefore increases when producers get a higher price for their product.
■ Prices of other goods: change in prices of other goods in the market also has influence on the supply of a commodity. E.G: if the price of good Y rises, the producer of X will start considering switching production to Y.
Factor affecting the supply of commodity
1. The price of commodity:- The supply of commodity very much depend upon its price. There is direct and positive relationship between price of commodity and supply.
2.The price of the substitutes:-The supply of a particular commodity is inversely related with the price of other commodities,such as the supply of wheat will fall with the rise in price of rice.This is due to the fact that rise in price of rice will encourage the producers to produce more rice.consequently area under wheat will be lesser and the supply will of decline
3.Change in technology:-If the change in technology or new discoveries bring reduction in price and increase in production,this will increase the level of supply also.
4.Goals of firm:-Generally the aim of firm is maximize the profit. Beside this maximum sales,maximum output or maximum employment is also taken as the goal s of firm..This goals change in them affect the supply of commodity.sometimes the producer may continue to maximize the supply of commodity without profit simply to build the their image and prestige in society.
5.Expected change in price:-In case producer expect an increase in the...