Question

Mention two factors other than price, which influence the supply of a commodity.

Answer 1

1. Expectations about Future Prices: The supply of any commodity is impacted by producers assumptions regarding future market pricing. In order to provide a large amount of a commodity at higher prices in the future, producers will store it and supply less now if they anticipate an increase in the commodity’s price. On the other hand, supply tends to rise during the current time when future price expectations are lower.
2. Natural Factors: Natural factors are particularly important for the supply of agricultural products. Natural factors like drought, flood, unfavorable climatic conditions, etc., adversely affect the supply of some commodities. Heavy rains and flood and drought conditions will lead to a decrease in the supply of agricultural commodities. Adequate rain and favorable climatic conditions may help in increasing the supply of agricultural commodities.