A supply curve is a graphical illustration of the relationship between quantity supplied and

1.A supply curve is a graphical illustration of the relationship between price, shownon the vertical axis, and quantity supplied , shown on the horizontal axis.2.The equilibrium price is the only price where quantity demanded is equal toquantity supplied.3.A demand curve shows the relationship between price and quantity demandedon a graph.4.Economists refer to the relationship that a higher price leads to a lower quantitydemanded as the law of demand .5.But nearly all supply curves share a basic similarity: they slope up from left toright .6.The nature of demand indicates that as the price of a good increases: buyersdesire to purchase less of it .7.In economics, the demand for a good refers to the amount of the good thatpeople: will buy at various prices .8.The term"ceteris paribus"means that: all variables except those specified areconstant .9.Quantity demandedrefers to the total number of units that are purchased atthat price.10.The price elasticity of demand for tickets to local baseball games is estimated tobe equal to 0.89. In order to boost ticket revenues, an economist would advise:increasing the price of game tickets because demand is inelastic .11.A 10 percent increase in the price of soda leads to a 20 percent increase in thequantity of iced tea demanded. It appears that: cross-price elasticity of demandfor iced tea is 2 .12.A perfectly elastic supply curve is: horizontal .13.Interpret the following statement: "An increase in the price of wheat willencourage farmers to increase the quantity of wheat supplied to the market."The statement is correct .14.Price floorsare enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

Learning Outcomes

• Explain the law of supply
• Explain a supply curve

Watch It

The law of supply states that more of a good will be provided the higher its price; less will be provided the lower its price, ceteris paribus. There is a direct relationship between price and quantity supplied. Watch this video to learn more.

You can view the transcript for “Episode 13: Supply” (opens in new window).

Supply of Goods and Services

Economists call this positive relationship between price and quantity supplied—that a higher price leads to a higher quantity supplied, and a lower price leads to a lower quantity supplied—the law of supply. The law of supply, like the law of demand, assumes that all other variables that affect supply are held equal (ceteris paribus).

Supply vs. Quantity Supplied

In economic terminology, supply is not the same as quantity supplied. When economists refer to supply, they mean the relationship between a range of prices and the quantities supplied at those prices, a relationship that can be illustrated with a supply curve or a supply schedule. When economists refer to quantity supplied, they mean only a certain point on the supply curve, or one quantity on the supply schedule. In short, supply refers to the curve, and quantity supplied refers to the (specific) point on the curve.

Figure 1, below, illustrates the law of supply, again using the market for gasoline as an example. Like demand, supply can be illustrated using a table or a graph. A supply schedule is a table—like Table 1, below—that shows the quantity supplied at a range of different prices. Again, price is measured in dollars per gallon of gasoline, and quantity demanded is measured in millions of gallons. A supply curve is a graphic illustration of the relationship between price, shown on the vertical axis, and quantity, shown on the horizontal axis. You can see from this curve (Figure 1) that as the price rises, quantity supplied also increases, and vice versa. The supply schedule and the supply curve are just two different ways of showing the same information. Notice that the horizontal and vertical axes on the graph for the supply curve are the same as for the demand curve.

Figure 1. A Supply Curve for Gasoline

The shape of supply curves will vary somewhat according to the product: steeper, flatter, straighter, or curved. Nearly all supply curves, however, share a basic similarity: they slope up from left to right and illustrate the law of supply. As the price rises, say, from $1.00 per gallon to $2.20 per gallon, the quantity supplied increases from 500 gallons to 720 gallons. Conversely, as the price falls, the quantity supplied decreases.

Practice Questions

glossary

law of supply: the common relationship that a higher price leads to a higher quantity supplied of a certain good or service and a lower price leads to a lower quantity supplied, while all other variables are held constantquantity supplied: the total number of units of a good or service producers are willing to supply at a given pricesupply: the relationship between the price of a certain good or service and the quantity of that good or service producers are willing to offer for sale supply curve: a graphic representation of the relationship between price and quantity supplied of a certain good or service, with price on the vertical axis and quantity on the horizontal axis supply schedule: a table that shows the quantity demanded for a certain good or service at a range of prices

Contribute!

Did you have an idea for improving this content? We’d love your input.

Improve this pageLearn More

What is a supply curve An illustration of?

What is the supply curve a graphical representation of?

What is the relationship between supply and the supply curve?

Is a graphical representation of the relationship between price and quantity supplied?