Explain how the following factors affect the supply of the commodity (any two)

a) Price of factor inputs

b) State of technology

c) Government taxation Policy

Supply refers to the quantity of the commodity that the firm is willing to offer for sale in the market at each possible prices during a period of time. One of the major determinants of the quantity supplied of a commodity is the price of its factor inputs. It includes the natural resources required to produce the commodity and the labour employed for the production. There are two ways by which price of the factor input affects the quantity supplied:

Decrease in supply: When the price of the factor input rises, it becomes expensive for the producer to continue the production. Thus the supply of the commodity falls. This shifts the supply curve to the left.

Increase in supply: When the price of the factor input falls, it becomes cheaper for the producer to continue the production. Thus the supply of the commodity rises. This shifts the supply curve to the right.

b)

Supply refers to the quantity of the commodity that the firm is willing to offer for sale in the market at each possible prices during a period of time. One of the major determinants of the quantity supplied of a commodity is the state of technology used for the production process. A producer can adopt both labour intensive or capital intensive technique of production. There are two ways by which technology affects the quantity supplied:

The decrease in supply: When the producer is using a labour intensive technology, it will be expensive for the producer to continue the production. Thus the supply of the commodity falls. This shifts the supply curve to the left.

Increase in supply: When the producer is using a capital intensive technology, it will be cheaper for the producer to continue the production. Thus the supply of the commodity rises. This shifts the supply curve to the right.

c)

Supply refers to the quantity of the commodity that the firm is willing to offer for sale in the market at each possible prices during a period of time. One of the major determinants of the quantity supplied of a commodity is policies of the government. Government policy can be favourable or unfavourable for the producers. Production can be influenced by taxation or subsidy scheme. There are two ways by which technology affects the quantity supplied:

The decrease in supply: When the government taxation policy is unfavourable whereby the producer would be compelled to pay more taxes, it will be expensive for the producer to continue the production. Thus the supply of the commodity falls. This shifts the supply curve to the left.

Increase in supply: When the government taxation policy is favourable whereby the producer would be given tax incentives, it will be cheaper for the producer to continue the production. Thus the supply of the commodity rises. This shifts the supply curve to the right.