How Business confidence affect supply and why it is not a determinant of individual supply.
Also explain what is meant by business confidence.
Dear Student,
Business confidence or expectation is the expectation that the price of this good will increase in the future or not. If there is a expectation that there will be increase in the price of the good, the producers will supply more and if there is expectation that there will be decrease in the price of the good in future, the producers will supply less of the commodity. In this way, business confidence or expectation affects supply.
It is not a determinant of individual supply as this has no effect on the any individual firm in the market. Expectations have effect on the supply of all the firms in the market.
Regards,
Business confidence or expectation is the expectation that the price of this good will increase in the future or not. If there is a expectation that there will be increase in the price of the good, the producers will supply more and if there is expectation that there will be decrease in the price of the good in future, the producers will supply less of the commodity. In this way, business confidence or expectation affects supply.
It is not a determinant of individual supply as this has no effect on the any individual firm in the market. Expectations have effect on the supply of all the firms in the market.
Regards,