Law of supply | Supply, demand, and market equilibrium | Microeconomics | Khan Academy | Summary and Q&A

TL;DR

The law of supply states that as the price of a good increases, the quantity supplied also increases, and vice versa.

Key Insights

• 👮 The law of supply states that as price increases, the quantity supplied by producers will also increase, and if price decreases, the quantity supplied will decrease.
• ✋ The relationship between price and quantity supplied is shown on a supply curve, where higher prices result in higher quantities supplied.
• 👷 Supply schedules provide specific quantities supplied at different prices, helping to construct the supply curve.
• 🧑‍🏭 The law of supply assumes that all other factors affecting supply remain constant.
• 🧑‍🏭 The supply curve can shift if factors such as production costs, technology, and input prices change.
• 😥 The minimum price at which producers are willing to supply a good is represented by the starting point of the supply curve.
• 👋 The law of supply applies to all goods and services, not just grapes or agricultural products.

Transcript

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Questions & Answers

Q: What is the law of supply?

The law of supply states that as the price of a good increases, the quantity supplied by producers will also increase, and if price decreases, the quantity supplied will decrease. It is based on the assumption that all other factors remain constant.

Q: How does the law of supply apply to grape farmers?

Grape farmers will increase their quantity supplied if the price of grapes goes up, as they can benefit from higher profits. Conversely, if the price of grapes decreases, grape farmers will reduce their quantity supplied to mitigate losses.

Q: Why does the supply curve slope upwards?

The supply curve slopes upwards because of the positive relationship between price and quantity supplied. As price increases, producers are willing and able to supply more of a good, resulting in a higher quantity supplied.

Q: Can factors other than price affect the quantity supplied?

Yes, factors such as production costs, technology, input prices, and government regulations can also impact the quantity supplied. However, in this analysis, these factors are assumed to be constant.

Summary & Key Takeaways

• The law of supply states that if price increases, the quantity supplied by producers will also increase, and if price decreases, the quantity supplied will decrease.

• A supply schedule for grape production is used as an example to illustrate how quantity supplied changes in response to price.

• The supply curve shows the relationship between price and quantity supplied, with higher prices leading to higher quantities supplied.