How does productivity affect supply?
This isn't a homework question I'm just curious, because I was reading about supply and demand off of google but I did't understand how productivity affected supply.
Can someone please help me.
I really want to know how productivity affects supply.
If productivity is "up" that means there is a much greater supply. It goes back to the old adage "supply and demand." If the supply is great but the demand is not, it will be hard to sell everything and the price drops. If the supply is short, or there is not much of a supply, and the demand is great, there will not be enough for those who wish to purchase it and then the price goes up.
Sra
Productivity is a measure of the efficiency with which resources are used to produce goods and services. It plays an important role in determining the supply of goods and services in the market. When productivity increases, it typically leads to an increase in supply. Here's how it works:
1. Increase in Output: Higher productivity means that more output can be produced with the same amount of resources. For example, if a company improves its technology or processes, it can produce more units of a product in the same amount of time. This increased output contributes to an increase in supply.
2. Lower Costs: Productivity improvements often result in lower costs of production. This can occur due to various factors such as better machinery, improved skills of workers, or streamlined processes. When costs decrease, producers are more willing and able to supply goods and services at a lower price, resulting in an increase in supply.
3. Expanded Capacity: Increased productivity allows businesses to expand their production capacity. This can be achieved by adding more workers or investing in capital equipment. With expanded capacity, businesses are able to produce and supply larger quantities of goods and services to the market.
4. Business Competitiveness: Higher productivity gives businesses a competitive advantage. They can offer their products at lower prices or higher quality, which attracts more customers and increases their market share. As businesses strive to gain a competitive edge, they often invest in productivity enhancements, leading to an overall increase in the supply of goods and services.
In summary, productivity improvements lead to an increase in supply by allowing businesses to produce more output, reduce costs, expand capacity, and gain a competitive advantage in the market.