What Are the Main Determinants of Supply

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The Answer is Factors that affect supply include the costs of production. As the costs of producing a good change, this will influence how much of a good a producer is willing to provide. Other factors include the profitability of a product and any other products a firm sells. A firm will want to produce and sell those products that will make it the most money, and so this will influence its supply decisions. This also links in with the profitability of goods in joint supply. Random shocks will also affect supply decisions, i.e. oil prices. One final factor that affects supply (and demand) is expectations. Firms' expectations about what they think will happen to the price of the good they are selling in the future will affect the amount they are willing to supply today. If they think it may go down in the future, then they will sell more of it now to achieve the highest revenue possible. If they think they will be able to sell it for more in the future, then they will hold back now and wait until the price does rise.

What Are the Main Determinants of Supply

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What Are the Main Determinants of Supply

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