The Supply Function and the Supply Curve
- Resources and technology determine what it is possible to produce.
- Supply reflects what is best to produce (amongst what is technologically possible).
The supply function represents sellers' behavior
Prices influence producers' supply decisions.
Positively sloped supply curve (upward
- Higher price, higher incentive to supply the good. (if ceteris paribus)
- Higher prices higher profit.
- As the price of a good falls, its supply falls as well.
There is a direct
relationship between the price of a good and the amount of that good that will be supplied.
The supply curve,
tells the analyst the quantity that producers are willing to supply for each price when all other influences on producers' planned sales remain the same.
The graph below displays the quantity associated with price in a supply table.
0 is the quantity that will be associated with a price of $1 on a supply table.
The law of supply results from the general tendency for the marginal cost
of producing a good or service to increase as the quantity produced increases.
A supply curve is also a minimum-supply-price curve
. The greater the quantity produced, the higher the price a firm must be offered to be willing to produce that quantity.