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.
