5.1Introduction
In Chapter 3 we outlined the factors affecting the demand for good and services and considered hoe demand may vary with price other variables. In a similar fashion we may analyse factors that determine the supply of those same goods and services and changes in these factors will influence the level of supply. The tome period over which a firm adjusts the of production is of particular significance and we will distinguish between the short run where the firm is faced with at least one factor of production in fixed supply and the long run when all factors and become variable. We will then see how the level of production in the short and long run affects with the cost per unit of output.