Question

Explain any three factors other than price which determines supply in the market.

Answer 1

Factors determining supply in the market:

• Number of firms: If the number of firms selling the same product in the market increases, then the supply of that product at a given price will increase in the market.
• Prices of the factors of production: Given the other factors, if the prices of the factors of production increase, there is a decline in the profit of the firm. Hence, the firm would reduce the quantity of supply at the current price level.
• Technological condition: Technological improvement in production enables the firm to increase the supply at the current price level.