A supply curve shows the relation between the quantity of a good supplied and Group of answer choices A. the price of the good. Usually a supply curve has negative slope. B. the price of the good. Usually a supply curve has positive slope. C. income. Usually a supply curve has positive slope. D. income. Usually a supply curve has negative slope.
The Correct Answer and Explanation is:
Correct Answer:
B. the price of the good. Usually a supply curve has positive slope.
Explanation:
A supply curve illustrates the relationship between the price of a good and the quantity of that good that producers are willing and able to supply over a specific period of time, holding other factors constant (ceteris paribus). The typical shape of the supply curve is positively sloped, meaning it rises from left to right.
This positive slope reflects the law of supply, which states that, all else being equal, an increase in the price of a good leads to an increase in the quantity supplied, and a decrease in price leads to a decrease in quantity supplied. This direct relationship exists because higher prices generally make production more profitable for sellers, encouraging them to increase output. Conversely, lower prices reduce profitability and may lead firms to cut back production or exit the market altogether.
The reason for this behavior is rooted in the concept of increasing marginal cost. As a firm increases production, it often encounters higher per-unit costs due to factors like overtime labor, equipment wear, and the use of less efficient resources. Therefore, to be willing to produce and sell more, firms require higher prices to cover these rising marginal costs.
Graphically, the supply curve is usually drawn with price on the vertical (Y) axis and quantity supplied on the horizontal (X) axis. A positive slope means that as the price increases, the quantity supplied increases, which is a standard feature in competitive markets.
It’s important to distinguish between movement along the supply curve, which is caused by a change in the price of the good itself, and shifts of the supply curve, which result from changes in other factors like production technology, input prices, number of sellers, or taxes.
Thus, the supply curve demonstrates the fundamental economic principle that price acts as an incentive for producers.
