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Explain how supply and demand interact to determine equilibrium price and output?

Number of Sellers

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Prices of Resources
Supply Determinants
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Definition and Explanation of Economics. Theory of Consumer Behavior. Indifference Curve Analysis of Consumer's Equilibrium. Equilibrium of Demand and Supply. Price and output Determination Under Perfect Competition.

Price and Output Determination Under Monopoly. Principles and Theories of Macro Economics. National Income and Its Measurement. For example, when more firms enter an industry, the number of sellers increases thus increasing the supply.

Increase in resource prices increases the production costs thus shrinking profits and vice versa. Since profit is a major incentive for producers to supply goods and services, increase in profits increases the supply and decrease in profits reduces the supply. In other words supply is indirectly proportional to resource prices. Increase in resource prices reduces the supply and the supply curve is shifted leftwards whereas decrease in resource prices increases the supply and the supply curve is shifted rightwards.

Taxes reduces profits, therefore increase in taxes reduce supply whereas decrease in taxes increase supply. Subsidies reduce the burden of production costs on suppliers, thus increasing the profits. Therefore increase in subsidies increase supply and decrease in subsidies decrease supply.

Improvement in technology enables more efficient production of goods and services. Thus reducing the production costs and increasing the profits. There are numerous factors that determine supply, and there are a total of 6 determinants of supply, including:. Modern technology incorporation in business and service delivery enables efficient, and efficacy in the production of goods and delivery of services reduces the overall costs of the final product.

The reduction in the production cost through technology will increase profits. Therefore, the supply increases and the supply curve will shift rightwards. Technology rarely deteriorates and it ensures the business remains efficient therefore a constant supply of the goods and services. When the number of sellers is high in a certain market, the quantity of product or service supplied to that market will be high and vice versa.

Therefore, an increase in the number of sellers in a market will decrease the supply and the supply curve shifts leftwards. An example is a situation where more companies enter into an industry, this will increase the number of sellers, and therefore supply will increase as well.

Changes in the expectations of the suppliers about the future price of a service or a product may affect the current supply. However, unlike the other determinants of supply, the expectations of the supply can be quite difficult to generalize. For example, when farmers anticipate that the price of the crop will increase. This will cause them to withhold the produce to benefit from a higher price.

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Competitive supply of two or more products refers to production of one or the other by a firm; the goods compete for the use of the same resources, and producing more .

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Non-Price Determinants of Supply. Changes in Production Technology. Changes in the Cost of Factor Inputs (Resources). Changes in the Number of Sellers in the Market. Changes in the Expectations of Future Prices. Changes in the Prices of Related Substitute Goods, and By-products.

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Learn 6 non price determinants of supply with free interactive flashcards. Choose from different sets of 6 non price determinants of supply flashcards on Quizlet. Sep 27,  · AO2 – Explain the non-price determinants of supply. RENT TP. (Include references to 4 factors of production.) The non-price determinants of supply are taxes & subsidies, technology, number of seller, price of other products, expectations and resources. Taxes and subsidies relate to the cost of factors of production and if the .

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Oct 16,  · Best Answer: For supply, it's: Size of market Technology Other government regulations Resource cost Expectations Subsidies and taxes For demand, it's: Tastes Other related goods' prices Expectations Income Size of Status: Resolved. An explanation of the different factors that affect the supply of a good or service, including price, input prices, technology and expectations. The Determinants of Supply. Search the site GO. Social Sciences. Economics Supply & Demand Basics What Are the Determinants of Supply?