Does supply increase/decrease? No, the change in the price of landline phoneservice does not affect any of the nonprice determinants of supply. The supplycurve stays where it is.
Does supply increase/decrease? No, the change in the price of landline phone
service does not affect any of the nonprice determinants of supply. The supply
curve stays where it is.
The law of supply states that other things beings equal there is a positive relationship between price and quantity supplied. It means that if the price goes up, the quantity supplied increases and if the price goes down, the quantity supplied decreases. Due to this law of supply, the supply curve is positively sloped or upward sloping.
The factors affecting supply
Change in Technology - A change in technology affects the supply of a good. If there is an improvement in technology then the efficiency in production increases, as a result, the per-unit cost of production decreases due to this a firm will supply more goods in the market, when supply increases the supply curve shifts to the right because of this rightward shift in the supply curve, the equilibrium quantity rises.
Price of inputs - A change in the price of factors or inputs that are used in production causes a change in the cost of production which is a result brings a change in supply. For example, when the price of input decreases, the unit cost of production will decline. With the lower cost of production, it is profitable to produce more units of outputs, as a result, the supply increases, and an increase in supply will cause a rightward shift in the supply curve.
Number of Producers - A decrease in the number of sellers in a market will result in an increase in equilibrium price and a fall in equilibrium quantity. This is because the decrease in the number of sellers in the market causes a decrease in supply and a decrease in supply shifts the supply curve to the left. As a result, the equilibrium price rises and the equilibrium quantity falls.
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