Question

is demand a determinant of supply?

Answer 1

If we talk about the direct determinants of supply of any commodity, they are Price level, input prices, technology, number of suppliers and such things that affect supply directly. Price level increase will motivate supplier to produce more, low cost of input will do the same, better technology and lesser suppliers all will increase supply and vice versa is also true.

Nowhere is demand metioned as a direct influencer for supply. but we see the dynamics of market does make a cause and effect relationship. if demand for a good increased suddenly due to some external or exogenous factor it will raise the price up in the market and now suppliers will be motivated to sell more and produce more or if demand decreases due to exogenous factors price will fall and producers or suppliers will reduce their supply. so indirectly demand does effect supply but the relationship is not clearly visible. we know the old Say's law that supply creates its own demand has been proven wrong by modern economics but this does not mean the the opposite has become true entirely that demand creates supply, it is able to do this only through the price mechanism of the current market.