1.

Explain any one factor that affects the supply of a commodity.

Answer»

Factors that influence the Supply of Commodity (Any one) : 

(i) Product Price: The quantity supplied varies directly to price of the good, other factors held constant. Generally, producers tend to supply more at a higher price to earn greater profits. Higher revenues from sales are necessary to induce producers to increase supply of a good. 

(ii) Objective of the firm: Firms pursue different goals. The amount of a good or service supplied is influenced by the objectives of the firm. e.g., a sales maximiser would supply more than the profit maximiser to gain greater market share. 

(iii) Taxation Policy: Imposition of heavy taxes on a commodity discourages its production and as a result its supply diminishes, on the other hand tax concessions of various kinds induce producers. 

(iv) Weather Conditions: Unfavourable weather like floods, drought, etc. decrease the supply of agricultural products, which means that at any given price, a lower quantity will be supplied. Conversely, especially good weather would increase the supply.



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