Determinants of Supply

Determinant means a factor or factors which influences or determines the result. In case of supply of a good it refers to factors which influence the supply of a good. Given below are some of the determinants of supply of a good –

1. Price of the good- It is one of the major determinants of supply of good, other things being equal higher the price of a good higher will be the supply of a good and vice versa.

2. Expectation of the consumer of a good – If consumer expect the price of good to increase, there will be more demand for that product now as people tend to buffer the good when they except the price of good to rise in future, and if they except it to decline they postpone their purchase of the good.

3. Seasonal Factors – Supply of a good is also affected by seasonal factors, this particularly applies to food products as some fruits or vegetables are available in plenty during some season and in other seasons there is shortage.

4. Prices of related goods – Prices of related goods also affect the supply of goods, so for example if the price of wheat is high while the price of rice is low then farmer will produce wheat as he will get more profits by increasing the production of wheat and therefore supply of wheat will increase and supply of rice will decrease.

5. Consumer taste and preference – Supply of a good is also affected by the taste and preference of consumer, because consumer taste and preference keeps on changing, for example people are now demanding more LED and 3D televisions so supply of such televisions is increasing and supply of LCDs and Flat televisions is decreasing.

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