Question

Point out important factors that lead to increase in supply.

Answer 1

1. Advancements in Technology: New and more efficient production technologies allow producers to increase output without a corresponding cost increase. This often leads to increased supply as goods can be produced more quickly and cheaply.
2. Decrease in the Cost of Production: A reduction in the prices of inputs such as raw materials, labour, or energy can lower the cost of production. When production becomes cheaper, producers are more willing to supply a greater quantity at the same price.
3. Government Subsidies: When the government provides subsidies to producers, it effectively lowers their production costs. Subsidies make it more profitable for firms to produce more, leading to an increase in supply.
4. Favourable Weather Conditions: For agricultural products, favourable weather conditions can lead to better yields and, consequently, an increase in the supply of these goods.
5. Increase in the Number of Producers: When new firms enter the market, the commodity's overall supply increases. This can happen due to deregulation, lower barriers to entry, or increased market demand.
6. Reduction in Taxes: If the government reduces taxes on production or sales, the cost of production decreases, leading to an increase in supply as firms can produce more at lower costs.
7. Improvements in Infrastructure: Enhanced infrastructure, such as improved transportation networks or more reliable power supplies, can reduce production and distribution costs, leading to an increase in supply.