Factors Affecting Supply ~ Offer is the number of goods offered by sellers in a certain market, in a certain period, and at a certain price level.
according to Daniel (2004), changes to offer This can occur due to the influence of several factors, including technology, input prices, production prices of other commodities, production quantities, and producer expectations.
Factors Affecting Supply (Supply)
Factors Affecting Supply (Supply)

There are several factors that affect product offerings in a market, including the following:

1. The price of the item itself

According to the law of supply, the quantity supplied of a good is affected by changes in the price of the good itself. This relationship is positive, i.e. if the price of goods increases, the number of goods supplied by producers increases. The goal is to achieve greater profits.

2. Technological Advancement

If there is a change or improvement in technology in the production process, there will be changes in production which tend to increase as well. The use of these new technologies requires changes in production costs which are usually relatively higher. If production increases due to changes in technology, then supply will also increase.

Technological advances can increase production capacity. This will affect the amount of goods offered in the market. A shoemaker before machines could produce 250 pairs of shoes a week, but when he found a machine that could produce 1,000 pairs of shoes a week, the supply grew.

3. Input Cost (Production Cost Factor)

The size of the input price will also affect the size of the amount of input used. If the price of production factors increases, the tendency to reduce their use will result in lower yields. A decrease in yield automatically causes a decrease in supply.

Costs used for production are costs incurred to make goods or services.

The costs incurred by the company in obtaining the factors of production affect the amount of production costs. The cost of production will rise if the prices of the factors of production rise. Production costs that exceed sales results will cause losses. This can cause the number of goods offered to decrease.

4. Prices for Production of Other Commodities

Farmers usually cultivate a commodity, for example soybeans. However, in fact the price of soybeans did not go up and even tended to decrease. On the other hand, the prices of other commodities in the market tend to rise, so that farmers change their farming patterns. Changes in farming patterns will affect the supply of these two commodities.

If the price of a commodity in the market tends to rise, many farmers are working on that commodity. The number of producers increases, the production offered will increase.

5. Expectations or Forecasts (Future Hopes)

When an item is scarce on the market, producers try to hold back the item from being offered to the market in the hope that prices will continue to rise and producers will get a large profit from their actions.

Farmers often speculate about the development of production prices in the market. This can be done based on experience, influenced by other farmers, or because of the news. Farmers’ forecasts and the choices they make will affect the planted area which ultimately affects the production and supply of the commodities being cultivated.

6. There is a Level of Competition

The higher the competition for an item because the more producers there are, the higher the supply. The number of manufacturers that produce and offer goods.

7. Prices of Substituting and Complementary Goods

If the price of a substitute good increases, the supply of the observed good will decrease. This is because the observed prices of goods are relatively cheaper than the prices of substitute goods. And vice versa. Meanwhile, if the price of a complementary good increases, the supply of the observed good increases.

There is a profit to be obtained by the producer or seller.

according to Paradise (2008), offer which is expressed in a mathematical relationship with the factors that influence it is called the supply function. The mathematical equation that explains the relationship between the level of supply and the factors that influence supply are as follows.

Sx = f(Px, Py, Pi, C, tek, ped, tuj, kebij)

where :

  • Sx = supply of goods x
  • Px = price of goods x
  • Py = price of good y (substitutes or complementary goods)
  • Pi = price of input or factor of production
  • C = production cost
  • tek = production technology
  • ped = number of merchants or sellers
  • goal = company goal
  • policy = government policy

Reference :

  1. Soediyono R., Introduction to Microeconomics; Price and Consumer Behavior, lecture series, Gunadarma Publishers, 1993
  2. Suparmoko, Introduction to Microeconomics, BPFE Yogyakarta, 2000
  3. Sukirno, S, 2011, “Introduction to Microeconomic Theory”, PT Raja Grafindo Persada, Third Edition, 26th Edition, Jakarta.
  4. Ahman, H., E., Rohmana, Y., 2007, “Economics in PIPS”, Second Edition, First Printing, Publisher Open University, Jakarta.
  5. http://myilmu Lintas Hukum.blogspot.co.id/2015/12/pengertian-penawaran-supplay.html