Changes in supply
A decrease (increase) in supply means that at a constant price, less
(more) of the commodity is supplied. This illustrated by the shift of the supply curve to the left (right) as shown in Figure 2.14. ab shows an increase in supply while ac shows a decrease in supply.
(more) of the commodity is supplied. This illustrated by the shift of the supply curve to the left (right) as shown in Figure 2.14. ab shows an increase in supply while ac shows a decrease in supply.
Figure2.14 Changes in supply.
At a constant price OP1 more can be supplied due to:
- A decrease in the cost of production.
- More availability of factors of production.
- Efficient technology.
- A fall in the price of a substitute.
- A rise in the price of a complement.
- Favourable terms of service/working conditions.
- An increase in the number of firms/producers.
- An increase in demand.
- Short gestation period,
- Favourable natural conditions in case of agricultural commodities.
- At a constant price OP1 less is supplied due to:
- An increase in the cost of production,
- Scarcity of factors of production, (raw materials], Inefficient technology.
- A rise in the price of a substitute,
- A fall in the price of a compliment.
- Unfavourable terms of service/bad working conditions,
- A decrease in the number of firms/producers.
- A decrease in demand.
- Long gestation period.
- Unfavourable natural conditions in case of agricultural commodities.