Non-price determinants of supply

[@chinmaygupta1530]

I salute you for creating this series. Also just one question, at 3:30 As the Profit is classified as a cost of production, and if cost of production rises then the supply falls, this would also mean that if the profit rises then the supply falls? Somehow I just can't make full sense out of that... I'm sure there's another angle and way to understand it, but thinking of it as it sounds makes it a little hard to believe, because why would the supply decrease if the owners of the business are enjoying lots of profits? I would think that higher profits would encourage them to produce more...

[@ibeconguru]

Chinmay Gupta generally as costs of production rise, supply will decrease. Don’t try to complicate it for yourself. Later you’ll learn difference between normal profit and abnormal profit and it’ll make more sense.

[@chinmaygupta1530]

@@ibeconguru Hi Mohamed, it's incredible how you always reply so fast on videos that seem to be barely getting any traction, (far less than they deserve) first and foremost thanks. I looked the abnormal and normal profits up, unfortunately I won't have the privilege of learning that as I'm an SL student, but I watched a video on it anyways and still didn't quite make the connection. It's just as strange for me to think that earning more profits, whether those profits are there to cover costs or to go beyond and really serve as "extra money" profits, have an inversely proportional effect on supply. I could completely understand this for the remainder of the FOPs, like if the wages increase then supply might have to decrease... but for wages it just doesn't make sense/ click in, is there a way for me to understand this since I'm much better at remembering things if I understand them fully. Thanks a lot in advance!

[@ibeconguru]

Chinmay Gupta think of profits as something that is planned and budgeted for when planning production. The payment to the entrepreneur is sort of like a ‘wage’ for the entrepreneur. If the entrepreneur wants to plan to give themselves a raise and increase their payment to reward their entrepreneurship, well there’s scarcity of resources, and that means less resources available for producing everything else, thus supply decreases. Also, an increase in profits is often due to an increase in demand, so the entrepreneur would not respond by increasing supply to offset that increase in demand, as increasing supply would push price down. I run online tutoring sessions for a reasonable fee, if you’re looking for more help and would like to book online tutoring, email me at [e-mail]

[@Pinokiopie]

thanks a lot for this!