What are the cause’s decreases in supply of goods and services?


Decrease in supply of goods and services takes place due to following factors.
1.       Shortage of factors of production: -The shortage of factors like land, labour, capital, raw materials, etc. reduces the production of goods and services. It decreases level of supply.

2.       Industrial disputes: -Industrial disputes result into strikes, which may lead to lockouts. In such case, industrial production falls and reduces its supply.

3.       Natural Calamities: -Natural calamities like flood, drought, etc. adversely affect the supply of farm products and raw materials.

4.       Lopsided(uneven) production: -More production of comforts and luxury goods reduces the supply of essential goods in the market and hence causes inflation.

5.       Hoarding of goods: -Hoarding is done by suppliers to earn more profit. It reduces the supply of goods at a particular point of time. It leads to inflation. Sometimes consumers tend to hoard goods, expecting prices to rise in the near future. This creates a shortage of goods and services in the market. So prices rise.

Hence decrease in supply is also responsible for inflation.