Sunday, October 14, 2007

Management Lite & Ezy 46 – Economics 104

Supply, like demand, is also affected by many factors.

Factors affecting supply:

Input prices For example, when the price of memory chip goes up, supply of computer drop. (In practice, however, computer manufactures can transfer the cost to customers.)

Technology New technology often reduces operating cost and/or increases efficiency, which in turn increase supply.

Number of competitors The more competitors, the less a firm will supply.

Substitutes in production For example, Dell introduced AMD-based PC not too long ago. Supply for Intel-based PC is likely to drop.

Taxes Excise duty, service tax etc. reduces supply. (In practice, again the cost can be transferred to customers.)

Expectation of (future) changes in price If the producer expects the price to go up, it will boost production.

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Economics 103

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