What are the determinants of supply?

Determents of supply are factors that may cause changes in or affect the supply of a product in the market place.

These factors include:-

(i) Production technology: An improvement of production technology increases the output. This lowers the average and marginal costs, since, with the same production factors, more output is produced. 

(ii) Prices of production factors: A rise in the price of one or more production factors leads to an increase in the production costs and vice-versa.

(iii) Prices of other products: The supply of a product may be influenced by the prices of other products, especially if the products are complementary.

(iv) Number of production units: As the number of production units increases, the total supply of a product increases and vice-versa.

(v) Taxes and subsidies: When taxes increase, the quantity supplied decreases because the cost of production increases. When subsidies increase, the quantity supplied increases because the cost of production decreases.

(vi) Expectations of producers: If producers expect a rise in the price of a product, they are likely to lower the quantity supplied and wait until the price goes up to sell the product at a higher price.

(vii) Time effect: In the short run, when the price of a good change, the supply of good cannot be changed rapidly. But in the long run, supply can be adjusted the demand.

(viii) Random, natural and other factors: The supply of agricultural products is influenced by natural phenomena and the weather conditions. Other factors affecting supply can be extended strikes, floods, political instability etc.