Factors affecting supply | Supply, demand, and market equilibrium | Microeconomics | Khan Academy | Summary and Q&A

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January 2, 2012
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Factors affecting supply | Supply, demand, and market equilibrium | Microeconomics | Khan Academy

TL;DR

An analysis of the factors that influence the supply of goods and services, including price of inputs, related goods, number of suppliers, technology, and expected future prices.

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Questions & Answers

Q: How does the price of inputs affect the supply of a product?

When the price of inputs, such as labor or materials, increases, the cost of production rises. This makes it less profitable for producers to supply the product at a given price, leading to a decrease in supply.

Q: How do related goods impact supply?

Related goods, particularly substitutes, can influence supply. If the price of a substitute increases, producers may shift their resources towards that product, resulting in a decrease in supply of the original good.

Q: What role does the number of suppliers play in supply?

The number of suppliers directly affects supply. An increase in the number of suppliers leads to higher supply, while a decrease in the number of suppliers results in lower supply.

Q: How does technology impact supply?

Technological advancements can increase supply by reducing input costs or increasing productivity. This enables producers to supply more of a product at a given price, leading to an upward shift in the supply curve.

Summary & Key Takeaways

  • The law of supply states that as the price of a good increases, there is an incentive for producers to supply more. Conversely, if the price of inputs increases, producers may supply less.

  • The price of related goods, such as substitutes for production, can also influence supply. If the price of a substitute increases, producers may allocate more resources to that product, leading to a decrease in supply of the original good.

  • The number of suppliers directly affects supply. An increase in the number of suppliers leads to higher supply, while a decrease results in lower supply.

  • Technological advancements can increase the supply of goods by reducing input costs or increasing productivity.

  • Expected future prices can impact current supply. If producers anticipate higher prices in the future, they may withhold supply to sell at a later date.

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