According to Meyers,” We may define supply as a schedule of the amount of goods that’s would be offered for sale at all possible prices at any one instant of time, or during any one period of time (e.g, a day, a week and so on ) in which conditions of supply remain the same’’ Determinants of supply of a commodity.
(1) Price of the commodity:- There is a direct relationship between price of a commodity and its quantity supplied.At higher price, quantity supplied will be higher and vice-versa.
(2) Price of Related Goods:- The supply of a commodity is also indirectly affected by the price of related goods.For example with increase in price of rice, supply of wheat falls because increased price of rice will induce producers for producing rice hence, wheat production will fall which further decreases the supply of wheat .
(3) Prices of Production Factors:- Supply of a commodity is also affected by the price of Factors used in the production of the commodity.If the factor Price decreases, cost of production also declines, accordingly supply increases.Conversely, if the factor price increases cost of production also increases and supply tends to decrease.
(4) Technological level:- Technological level and its change also affects supply of the commodity.Investment in the technique of production reduces cost of production.Consequently profits tend to increase inducing an increase in supply.
(5) Number of firms :- Market supply of a commodity also depends upon number of firms in the market.Inrease in the number of firms results in the increase market supply. On the other hand,decrease in the number of firms results in the decrease in market supply of a commodity.
(6) Goal of the firm :- If the goal of the firm is to maximize profits, more quantity of the commodity will be offered at higher.
(7) Expected Future Price:- Expected price change in the future also affects the supply.If the producer expects price of the commodity to rise in the near future, current supply of the commodity should reduce.
(8) Government policy :- ‘Taxation and Subsidy’ policy of the government also affects market .market supply of the commodity. Increase in taxation tends to reduce the supply, while subsidies tend to induce the producer to provide greater supply of the commodity.
