Question

In: Economics

The determinants of supply (factors that lead the supply curve to shift) are number of sellers,...

The determinants of supply (factors that lead the supply curve to shift) are number of sellers, technology, resource prices, taxes and subsidies, and expectations of producers.

EXPLAIN HOW EACH OF THESE DETERMINANTS AFFECT SUPPLY.

Solutions

Expert Solution

The shift in supply curve means the curve is totally shifted to either right side or left side and the factors that affect it are given in the question

1. A number of sellers- as there is the number of sellers, of a good so supply will increase.

if the supply of good increases then this will shift the whole supply curve to the right because of more and more productive because of more production for the same goods by more number of sellers

2.Technology- suppose there is a new technology in the market which cuts the production time of a good or service. this means the produces will able to produce a number of goods with the same number of resources due to advanced technology and this will also cause a shift of supply curve to the right

3. Resources price- for production of any good the basic requirement is a from the raw material which comes from the resources.

suppose if the resource price is low that means the production cost will be very cheaper and this will cause more and more production and shift in the right of the supply curve.

4.taxes and subsidies- these two terms are opposite to each other.

tax means when there if there is a charge on income that is demanded by the government for further development activities in the country.

whereas a subsidy in which government helps needy ones buy its funds.

So in case of a tax, the production will be difficult for the producers because of paying more to the government so the production will be decreased and there will be left shift of the supply curve and the opposite thing will happen in case of subsidy and there will be the right shift in the supply curve.

5. The expectation of the producers- let's clear this with an example say in the future I think that the sugar will be Limited in the supply due to some type of sugar market failure.

so I try to buy more and more sugar right now and which means I will demand more sugar.

This causes the producers to produce more in the current scenario for me or anyone who required the sugar and this will cause a shift of supply curve to the right because here I am expecting in the future that the price of sugar will rise and so I am buying more and more sugar today.


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