the price larger the supply. Price is the incentive for the producers and
sellers to supply more.
supply of a commodity depends not only upon its price but also price of other
commodities. For instance if the price of commercial crops like cotton rise,
this may result in reduction in cultivation of food crops like paddy and so its
input prices go up, this results in rise in cost and so supply will be
expectation over future prices determines present supply. If a rise in price is
anticipated in future, sellers tend to retain their produce for future sale and
so supply in present market is reduced.
advancement in technology, production level improves, average cost declines and as a result supply level increases.
agriculture, natural factors like monsoon, climate etc. play a vital role in
determining production level.
discovery of new raw materials which are cheaper and of high quality tends to
increase supply of the product.
for inputs, credit, power etc. encourage the producers to produce more.
Withdrawal of such incentives will hamper production. Taxes both direct and
indirect kill the ability and willingness to produce more.
goal of the firm is sales maximisation or improving market share, the supply of
the product is likely to be higher.