Determinants of Supply

1. New Technology – Newer technology is more efficient for producing goods and can produce more, which means more output per input. Newer technology reduces the cost per unit so the company can produce more which will increase supply.

2. Increase in the number of suppliers – An increase in the number of suppliers will increase supply and a decrease in suppliers will decrease supply.
3. Decrease in business taxes – When there are decreases in business taxes then companies can produce more because the costs of production has decreased. With more money the companies can buy more resources or newer technology that will increase production. An increase in business taxes will decrease supply because companies produce less because their earnings are going to taxes.
4. Costs of factors of Production (Land, Labour, Capital and Enterprise) - When costs are low companies can produce more because the costs of workers and raw materials are lower and therefore the companies can produce more and will increase supply. The same is true if costs are high then companies can’t produce as much which will decrease supply.
5. Change in prices of related goods – Complements in production: Increasing a product will increase the by-product of that good, this will lower the price of that by-product. When the price of the good increase the complement’s supply will increase and the price will be lower.
Substitutes in production: An increase in the price of one product will cause the supply curve of other products that are substitutes in production to fall. If the price of a good falls then the supply of other substitutes will increase.
6. Expectations about the future – When companies expect future prices to be high, they begin to stockpile and sell later at a higher price, this will decrease the supply at the current time. When companies expect future prices to be lower they will increase the supply and try to sell before the price drops.
7. According to Climate Conditions which is especially important in agriculture. When environmental conditions affect supply it can increase or decrease supply. Supply will increase if weather conditions are fair due to the fact that crops will be better. The supply will decrease if weather conditions inhibit the ability to produce agriculture. This can help explain why foods prices fluctuate.