- change in tax on a product directly influence the supply of that product. this changes can be: i) increase in tax: rise in tax leads to increase the cost of production and reduces profit margin as a result supply for that product falls. ii) decrease in tax : leads to falls in the cost of production and increases profit margin.
- determinants of demand
- price of the commodity
- price of related goods
- income of the consumer
- taste and preferences
- future expectation
- size and composition of population
determinants of supply are:
- price of the commodity
- price of other goods
- price of factors of production
- state of technology
- taxation policy
- number of firms
- means of transportation and communication