Factors influencing supply - prices of factors of production, Managerial Economics

Prices of the factors of production

As the prices of those factors of production used intensively by X producers rise, so do the firms' costs. This cause supply to fall as some firms reduce output and other, less efficient firms make losses and eventually leave the industry.  Similarly, if the price of one factor of production would rise (say, land), some firms may be tempted to move out of the production of land intensive products, like wheat, into the production of a good which is intensive in some other factor of production.

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