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Supply

 

If the price of a good increases, ceteris paribus then firms are likely to be more willing to supply larger amounts. This leads to an upwards sloping supply curve. A change in price will lead to a movement along the supply curve, whilst a change in any other factor will lead to a shift in the supply curve.

We are able to identify two main reasons for the supply curve being upwards sloping:

        Incentives for increasing production - if the price of particular good rises then producers will find it more financially rewarding to devote resources to that good and away from others. 

        Theory of increasing costs - due to the increasing opportunity costs of production as less and less well suited resources are switched to it, a higher price must be available in the market place to make it economically viable to use these resources.

Notes on the Internet
The Supply Curve
Written by Robert Schenk
The Supply Curve
Produced by the University of Nebraska

 

 

 

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