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Price of the commodity

If the price of a commodity increases, supply will increase and if the price of a commodity decreases, the supply will also decreases. This is because goods and services are produced by the firm in order to earn profits and profits rise with the rise in the price of the product.

Prices of the related goods

If the prices of other goods rise, they become relatively more profitable to the firm to produce and sell, than the good in question. It implies, that if the price of wheat rises, the farmer may shift lands to wheat production and go away from producing paddy.

Factors of production

If the factors of production are very expensive, the cost of making goods increases and may affect the profitability. Hence the price of factors of production plays an important role in the supply of a commodity.


Inventions and innovations tend to make it possible to produce more or better goods with the same resources and tend to increase the quantity supplied of some products and to reduce the quantity supplied of products that are displaced.

Government policy

Production of goods may be subject to the imposition of commodity taxes such as excise duty, sales tax and import duties. These raise the cost of production and so the quantity supplied of a good would increase only when its price in the market rises. Subsidies, on the other hand, reduced the cost of production and thus provide an incentive to the firm to increase supply.

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