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Factors affecting Supply

Factors affecting Supply. Time. The longer the time period to increase production, the more elastic the supply will be. Seller of fresh vegetables- Supply cannot increase production in a day or even a month

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Factors affecting Supply

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  1. Factors affecting Supply

  2. Time • The longer the time period to increase production, the more elastic the supply will be. • Seller of fresh vegetables- • Supply cannot increase production in a day or even a month • Supply is inelastic and remains so until more vegetables can be planted, harvested and brought to market.

  3. Ease of Storage • When the price of a product drops, sellers have two options. • They can either sell the product at the new price or put it into storage until the price increases again. • Steel industry enjoys high supply elasticity because it is easy to store steel. • Agricultural industries have low supply elasticity because it’s difficult to store large quantities of produce for an extended period.

  4. Cost factors • Increasing supply may be costly depending upon the industry. • Car manufacturers may be able to increase supply in the short term by requiring workers to put in more overtime. • A permanent increase in production may be much more costly because a new factory may have to be built. • CYU page 101 Questions 1 and 2

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