Question

Mention two factors which cause decrease in supply.

Discuss four factors which determine the decrease in supply phenomenon.

Answer 1

A decrease in supply may be caused by any of the following reasons:

1. Rise in input prices results in an increase in the cost of production.
2. Rise in prices of other goods makes their production more profitable. It becomes less profitable to produce the given commodity.
3. Technology becoming outdated causes an increase in the cost of production and hence a decrease in supply.