The Supply Curve · micro.sg

Idea

The supply curve shows, for each quantity, the minimum price at which producers are willing and able to supply the good — equivalently, the quantity supplied at each price. Read down the price axis, it traces the lowest price producers will accept; read across the quantity axis, it traces how much is offered at each price.

Diagram

A market supply curve. Price is read on the vertical axis; the quantity supplied at each price is read on the horizontal axis. The curve slopes upward by the law of supply.

Mechanism

The upward slope is the law of supply — a direct relationship between price and quantity supplied. A higher price raises the revenue, and so the profit, a producer earns on each unit; producers are therefore more willing and able to sell as price rises, and offer a greater quantity.

Considerations

A change in the good’s own price is a movement along the supply curve (a change in quantity supplied); a change in a non-price determinant is a shift of the whole curve, treated under non-price determinants of supply and shifts versus movements.