Market Analysis: 5 Non-price determinants of supply

Aside from price as a major factor affecting the quantity supplied of the producers, the following factors are important to consider in order to understand why supply curves shift either to the right or to the left of the original supply curve.

5 Non-price determinants of supply:

1. Number of Sellers
2. Technology
3. Cost of Production
4. Taxes and Subsidies
5. Importation
 

1. Number of Sellers (↑ no. of seller, ↑ supply)

The number of sellers in the market will indicate the quantity available for sale. Thus, the greater is their number, the more is the quantity supplied for a particular good or service.

2. Technology (↑ no. of tech, ↑ supply)

A modern or advance technology will result to mass production, while a traditional method brings about inadequate output.

3. Cost of Production (↑ cost of production, ↓ Quantity demanded)

The higher the cost of producing a particular good, the lesser is the amount of goods available for sale.

4. Taxes and Subsidies (↑Taxes-↓Supply, ↑Subsidies-↑Supply)

Taxes are negative income to people especially to the producers. Instead of using the amount to production activities, it will be used to pay what the government requires from an organization. The higher the tax, the lesser will be the amount available for re-investment by the firm, thereby creating less output.

On the other hand, subsidies are grants or aids extended by the government (could be monetary or in kind) to help ease the production activities of producers. Therefore, the more subsidies given by the government, the more outputs will be produced.

5. Importation

The higher the goods are imported, the higher the supply.