What are determinants of supply?
Basically, there are 5 determinants of supply which includes:
- Price: As law of demand suggests, increase in price increase supply and decrease in price decrease supply.
- Input prices or the cost of factors of production: Increase in input prices (or cost of production) reduces supply as it becomes expensive to produce goods.
- Technology: Better technology helps to produce larger quantity of goods which increases the supply.
- Number of sellers: More the number of sellers in economy or market, more the supply.