Supply of Factors as defined in economics

In contrast to demand of factors, supply of factors remains unaffected in both perfect competition and monopoly situations in the market.

Supply of factors depends on many things according to its type. For example: Labor depends on age, sex, skill, literacy rate, interest in job etc. but the main factor on which supply of factors depend is rate of real wage.

There is a direct relationship between real wage and supply of factors. So, increase in the rate of wages will cause the supply of labor to increase. Every labor will want to work in that firm or company which is giving higher rate of wages in the whole market.

Supply of Factors under Perfect Competition:

Labors will prefer working for that firm or company which is offering higher rate of wages than the others. So in perfect competition firms must increase the rate of wages to avoid the danger of labor union.

Supply of Factors in Monopoly:

In supply of factors, even monopolist is not able to take any big advantage of being monopolist. Unless monopoly firm offers better wage rates, labors will prefer working in other markets rather than for such firm or company.


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