Question

In: Economics

Explain why supply curve are upward sloping?

Explain why supply curve are upward sloping?

Solutions

Expert Solution

Why the supply curve slopes upwards

Supply means the quantity of a product offered for sale at a given during a period of time. The period may be a day, a week, or a month. The supply curve moves upward from left to right indicating that the quantity offered for sale will increase with every increase in price while other things remaining the same. Other things remaining the same include the number of sellers in the market, the state of technology, the level of production costs, the seller’s price expectations, and the prices of related products.

There is a direct relationship between supply and price. The producers are willing to produce more at a higher price to earn more profit and less at lower price to avoid loss. While other things remain the same an increase in price brigs more profit to the producers and they produce more. At lower price while other things remain the same brings low profit to the producers and they produce less. In single words higher the price higher the quantity supplied and vicevers.

In the above figure the quantity supplied is measured on the horizontal axis and price on the vertical axis. SS is the supply curve. It slopes upward from left to right. The upward slopes reveals that quantity supplied increase with increase in price, only when other things remaining the same.


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