Determinants of Supply

Determinants of Supply
1. Number of suppliers – increase in suppliers = increase in supply
2. Technology – increase in technology = increase in supply
3. Cost of production – increase in wages, interest, profit, rent = businesses will produce less = supply will decrease
4. Expectations about future prices

• Expect prices to go up
  • stockpile = supply decreases
  • ramp up production = supply goes up

5. Price of substitutes and complements in production

• Substitutes – example: lettuce and tomatoes
  • demand for lettuce goes up = price goes up = quantity supplied goes up = supply of tomatoes will go down = price of tomatoes will increase
• Complements – example: beef and hides
  • price of beef goes up = quantity supplied goes up = supply of hides will go up = price of hides will go down

6. Business taxes – business taxes go up = supply decreases = price increases



Stephanie Powers, "ECON 100: Determinants of Supply," (lecture, Red Deer College - Donald School of Business, Red Deer, AB, October 18, 2011).

Stephanie Powers, "ECON 101: Determinants of Supply," (lecture, Red Deer College - Donald School of Business, Red Deer, AB, January 25, 2012).