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Guide to Referencing

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Factors affecting Supply

Price of the commodity: A rise in price will result in more of the commodity being supplied to the market and vice versa.

Prices of other commodities: For example if it is more profitable to produce LCD TVs then producers will produce more LCD TVs as compared to PLASMA TVs. Thus the supply curve for PLASMA TVs will shift inwards i.e. a fall in supply.

Change in cost of production: Increase in the cost of any factor of production may result in the decrease in supply as reduced profits might see producers less willing to produce that commodity.

Technological advancement: Improvement in technology results in lowering of cost of production and more profits for the producer and thus more supply of that commodity.

Climate: Climate and weather conditions affect the supply of commodities especially agricultural goods.

 

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