2. Factors beyond Price
Changes in the Supply of goods and services can,
and are, influenced by factors outside of the control
of individual Producers.
Each Producer of a good sets individual production
levels that then affect the market as a whole.
The market itself can affect supply by changing price
expectations. For example, the higher the price of a
good, the more of it that will be produced.
These price expectations can lead to what is referred
to as Speculation. Speculation is the holding, or
purchasing, of a good with the expectation that the
price will increase in the future.
3. Producer Factors of Supply
A very simple factor
determining the supply of a
good is the number of
producers of that good.
If the supply of a good is
low and the price of a
good is high, move
producers will begin to
make that good.
Even if supply of a
good is high, high
prices for the good will
still entice more
producers to shift to
that good.
4. Speculation and Supply
If Producers feel that the
value of their good will be
higher in the future, they
have the option of holding
onto their good until then.
This lowers the supply of
the good in the short-
term on the speculative
view of higher prices in
the future.
On the flip side of this, if
prices are expected to go
down, producers will sell
as many goods as they
can, thus increasing
supply, in order to
maximize their profits.
5. Examples
Producer Influenced
New Producers
entering the Market
Changes in Producer’s
Goods
Producer Growth in
Scale
Speculation
Farmers waiting to sell
crops
Factories stockpiling
inventory
Store sales
