Chapter 14: Problem 509

What is meant by the term "supply", and what is a "supply curve"?

Short Answer

Expert verified

In economics, "supply" refers to the total quantity of a good or service that producers are willing and able to offer for sale at different prices within a certain time frame. A "supply curve" is a graphical representation of this concept, showing the relationship between the price of a good or service and the quantity supplied. The supply curve generally slopes upward, indicating that as prices increase, so does the quantity supplied. The curve can shift due to factors other than price, such as technological advancements or government regulations, which can affect the market equilibrium of price and quantity.

Step by step solution

Definition of Supply

In economics, supply refers to the total quantity of a good or service that producers are willing and able to offer for sale at different prices, given a certain period of time. Supply can be influenced by factors such as production costs, technological advancements, government regulations, and the expectations of future prices.

Supply Curve

A supply curve is a graphical representation of the relationship between the quantity of a good or service that producers are willing and able to supply and the price of that good or service. The supply curve typically slopes upward, indicating that as the price of a good or service increases, the quantity supplied also increases. This is because higher prices generally incentivize producers to produce more, so they can maximize their profits.

Components of a Supply Curve

A supply curve has two main components: 1. The horizontal axis (X-axis) represents the quantity of the good or service supplied. 2. The vertical axis (Y-axis) represents the price of the good or service. By plotting the different price levels and their corresponding quantities supplied, we can create a curve that demonstrates the relationship between price and quantity supplied. This helps us understand how changes in price can affect the quantity of a good or service available in the market.

Shifts in the Supply Curve

Supply curves can shift due to factors other than price. For example, a technological advancement that lowers production costs can cause the supply curve to shift to the right (an increase in supply). Conversely, a new government regulation that increases production costs can cause the supply curve to shift to the left (a decrease in supply). Shifts in the supply curve can help us analyze how these external factors can impact the market equilibrium of price and quantity.

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