Expansion in supply refers to a situation when the producers are willi...
Larger quantity of the commodity at an increased price
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Expansion in supply refers to a situation when the producers are willi...
Expansion in supply refers to a situation when the producers are willing to supply a larger quantity of the commodity at an increased price.
Explanation:
Expansion in supply occurs when producers are willing and able to increase the quantity of a commodity they are willing to sell in the market. This is usually a result of various factors such as increased demand, improved production technologies, or favorable market conditions.
Factors influencing expansion in supply:
Several factors contribute to an expansion in supply:
1. Increased demand: If there is an increase in demand for a particular commodity, producers may expand their supply to meet the growing market needs. Higher demand often leads to higher prices, which in turn incentivizes producers to increase their supply.
2. Improved production technologies: Technological advancements can increase the efficiency and productivity of producers, allowing them to produce more output for the same cost. This leads to an expansion in supply as producers can now offer a larger quantity of the commodity in the market.
3. Favorable market conditions: Changes in market conditions can also influence the expansion in supply. For example, if the cost of raw materials or production inputs decreases, producers may be incentivized to increase their supply and take advantage of lower production costs.
Impact on price:
Expansion in supply typically leads to a decrease in price. When producers are willing to supply a larger quantity of a commodity, the market becomes more competitive, and sellers may need to lower their prices to attract buyers. This is because the increased supply puts downward pressure on prices as producers try to sell their larger quantity of goods.
However, it is important to note that expansion in supply does not always result in a decrease in price. If the increase in demand is significant enough to absorb the larger supply, prices may remain stable or even increase. Additionally, factors such as changes in production costs or government regulations can also influence the price of the commodity.
In conclusion, expansion in supply refers to a situation when producers are willing to supply a larger quantity of a commodity at an increased price. This expansion is driven by factors such as increased demand, improved production technologies, and favorable market conditions. The impact on price depends on various factors and can result in either a decrease, stability, or increase in prices.
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