Supply Factors

The clark s version of marginal productivity theory takes full employment of productive factors as given and assumes that the supply of factors is perfectly inelastic.

Supply factors. Supply refers to the quantity of a good that the producer plans to sell in the market. If the price of raw materials used in the production of a product goes down then s will increase this means that it will shift to the right. In simple terms supply is the function of price and cost of production. The supply of factors also exercises an important influence on the prices of factors.

Several factors come in to play affecting demand and supply in various positive and negative ways. Supply can be influenced by a number of factors that are termed as determinants of supply. The following factors affect supply s so changes in these determinants will shift the supply curve. Some of the more important factors affecting supply are the good s own price the prices of related goods production costs technology the production function and expectations of sellers.

In such a case the supply of his product would be 50kgs at rs. And in the reverse if the price of inputs increases then s will decrease. The latest improvements in digital cameras can drive more demand a price drop in gym memberships can increase demand for exercise gear or price increases in organic foods might increase supply from vendors but drops the demand from price. Generally the supply of a product depends on its price and cost of production.

For companies if the cost of production increases the supply of product would shrink so as to save the resources. The supply of a product and the cost of production is adversely related to each other. Supply increases when there is increase in number of firms producing the product when there is political stability exists natural conditions remain conducive when industrial relations are maintained well between workers and industrialists and supply decrease when the above factors are not favourable. For example due to the high wages rate of labour.

Understanding elasticity of supply. Elasticity of supply is a measure of a producer s ability to cope effectively with changes in demand. Overall price is a factor that affects a product s supply the most.

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