The Law of Supply

Non-price Factors of Supply

Contributors

Carys Brown

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Non-price Factors of Supply
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There are five non-price factors of supply that can influence the willingness of suppliers to produce goods. Utilising the four factors of production, land, labour, capital and enterprise, business decisions on the quanitiy that firms supply of a product will alter.  

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Cost of Production
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When land, labour and capital costs are large, then the cost required to produce goods increases also. This means that suppliers will reduce their production as the cost to make the goods has risen. The opposite will occur if the cost of production decreases as they are willing to produce more goods. 

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The Law of Supply
Non-price Factors of Supply
The Effects of Changes in Price
The Effects of Changes of Non-Price Factors

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Expected Future Prices

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The expectations of businesses regarding the price of goods will affect how much they supply. For instance, if firms expect to recieve higher prices for their goods next week, then they will reduce supply now and increase it in the next week in order to receive a greater profit. The opposite will occur if they expect prices to decrease in the future, suppliers will increase output before prices fall. 


Furthermore, future prices of goods may affect a businesses level of capital investment such as new tools, technology or machinery. For example, if there was an expected increase in iron ore prices, mines will begin to increase their search for deposits and machinery required. 

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Number of Suppliers
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If there is a large number of businesses and sellers within a market, then the level of output and supply will increase. The opposite is true if there is limited competition within a market due to possible low profit oppurtunities for firms or anti-competative behaviour, this results in less sellers and therefore, a lower quantity of supplied goods. 

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Technology
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Technology is seen as more efficinet and precise work, therefore allowing producers to increase their output and cut labour costs. Therefore, an increase in the level or technology or capital machienery used within a business means that their quanity supplied will increase. However, if the quality of machinery is outdated, output levels will be low and therefore, quanity supplied will also be limited. 

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