supply like demand there is no particular law but whenever price of a particular product increases the supply of that product also increases and other factors will be constant this is law of supply.
Supply also has determinants like demand as follows:
Cost of production: the cost of production plays an important role because if the cost of production rises the profitability of the producer will decrease and there is a risk he might be in loss.
Profitability of the product: the profitability is the key motivation to any supplier in producing a particular product.
Profitability of the alternative product: sometimes the supplier also get attracted to the substitute by looking at there profit margin, they may shift to it.
For example:- In Orient, they basically manufacture fans when the price of fans rises they would be willing to supply more so the supply of usha ceiling fan would increase but when there is rise in the cost of production there profit margin will be reduced so profitability of a product is also a major factor then they might think to shift to another product in which would have more profit margin.
No comments:
Post a Comment