Law of supply
Definition. The law of supply states that, other things being equal, as the price of a good rises the quantity supplied of it rises, and as the price falls the quantity supplied falls. This direct relationship gives the supply curve its upward slope.
Higher prices make production more profitable and cover rising marginal costs of output, encouraging firms to supply more. Holding other factors constant isolates the effect of price from changes in costs or technology.
This term belongs to Demand and Supply Analysis in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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