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Question
Explain any two causes of increase in supply of a commodity.
Solution
- Reduction in factor price: It will decrease the cost of production due to which profit increases in this situation, the supplier will increase the supply of the commodity.
- Decrease in taxation: Decrease in taxes by government will also decrease the cost of production due to which profit increases. In this situation, the supplier will increase the supply of the commodity.
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RELATED QUESTIONS
Due to installation of a machine with latest technology, the cost of production has decreased. It will lead to ______.
Match the following and select the correct option.
| Column I | Column II |
| (i) Expansion of supply | (A) Prices are expected to fall in future |
| (ii) Decrease in supply | (B) Fall in prices |
| (iii) Contraction of supply | (C) Prices are expected to rise in future |
| (iv) Increase in supply | (D) Rise in prices |
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