Question

Define supply. Mention the causes which determine the supply of a commodity.

Hint:

Supply is about what sellers are willing to offer. It's mainly driven by the product's price, production costs, and technology.

Answer 1

Definition: Supply refers to the quantity of a good or service that producers are willing and able to offer for sale at various prices during a specific period of time. Causes/Determinants of Supply: The supply of a commodity is influenced by several factors:

Price of the Commodity: This is the most significant determinant. According to the Law of Supply, a higher price leads to a higher quantity supplied, and a lower price leads to a lower quantity supplied.
Price of Inputs (Factors of Production): If the cost of inputs like labor, raw materials, or energy increases, production becomes less profitable, and supply decreases.
Technology: Improvements in technology increase productivity, lower the costs of production, and thus increase the supply of a commodity.
Government Policies: Taxes on goods increase the cost of production and reduce supply. Conversely, subsidies lower the cost and increase supply.
Prices of Related Goods: If a producer can produce another, more profitable good with the same resources, the supply of the original good might decrease.
Number of Firms: An increase in the number of firms in the market leads to an increase in market supply.