Discuss the factors that determine the supply of a commodity. – NABTEB QUESTION

The factors determining the supply of a commodity are:

i. Cost of production: – A change in the cost of production will lead to a change in the supply of commodity.

ii. The price of the commodity:- Increase in the price of a commodity will increase its supply while a decrease in its price will decrease the supply.

iii. Weather variation:- a favourable weather condition will boost supply while an unfavourable climate will reduce the supply of agricultural products.

iv. The number of produce:- The greater the number of producers the greater the quantity supplied.

v. Changes in the prices of other goods:- If the price of a substitute of complement good changes the supply of a given commodity will also change.

vi. The level of technology:- Improvement in the method of production will increase the supply of a product.

vii. Government policy:- Excise tax on producers may discourage producers from producing more while subsidy increases supply.

viii. Availability of inputs such as raw materials labour and capital will determine the supply of a commodity.

ix. The proportion of output-consumed by the producer will affect the supply.