By LEAH MONTEJANO
Staff Writer
Factors of Supply
The Supply has 8 different factors that impact it. These factors include; Cost of Inputs, Productivity, Technology, Taxes & Subsidies, Expectations, Government Regulations, and the Number of sellers. The cost of inputs is the cost it takes to produce the product. Productivity refers to how efficiently the product can be made. The technology determines what it takes to make the product. Both the taxes and subsidies are how much the government is paid or can assist with production. The expectations refer to how many can be sold. The government regulations are the restrictions or government safety standards that affect cost. Lastly, the number of sellers is important because it is the number of workers that can work on the product
Supply Elasticity
Elastic Supply is defined as a small increase in price which leads to a larger increase in quantity. Inelastic Supply is an increase in price leading to little to no impact on the quantity. Overall, Elasticity of Supply determines the responsiveness of a product’s supply after a change in the market price has changed. Elastic Supply indicates that the elasticity is greater than one resulting in high responsiveness, Inelastic Supply indicates that the elasticity is less than one resulting in low responsiveness to the change of price. According to the theory of Economics, the supply of goodwill increase when the price’s also increase and vice versa.
Stages of Production
The Stages of Production follow three steps.
Increasing Returns: Increasing marginal returns occurs when the addition of a variable (labor) input to another input (capital) encourages the other variable input to be more productive. An example of this: two workers are more than twice productive as a single worker.
Diminishing Returns: Diminishing Returns predicts that after the highest level of capacity is reached, adding another factor of production will lead to a smaller increase in output. For example, a worker may produce 50 products per hour for 20 hours but in the 21st hour, the output level may drop to 40 per hour. This is known as Diminishing Returns because the output has started to decrease.
Negative Returns: Finally, after a certain point, the marginal product becomes negative, implying that the additional unit of labor has decreased the output, rather than increased it. The cause of this is the other two stages that occur before.