Supply Curve

Categories: Economics,

A graph showing the hypothetical supply of a product or service that would be available at different price points. The supply curve usually slopes upward, since higher prices give producers an incentive to supply more in the hope of making greater revenue. In the short run the price-supply tradeoff is greater than in the long run. In the short run, an increase in price will usually cause an increase in supply, but the leading producers can only manage a limited increase. However, in the longer term, new producers enter the market attracted by higher prices, and the supply at each price increases more significantly. In theory, in the most extreme cases, supply can be totally unreactive to price (special cases of very uncompetitive markets), or supply can be infinite at a particular price (e.g. a highly competitive market).