Law of Supply Worksheet Answer the following questions: Steps to determining a supply curve: 1) Which group are we talking about with supply curves, producers or consumers? 2) What is the relationship between price and the quantity supplied? (If price is set high then what is the effect on the quantity supplied) 3) Demonstrate this relationship of price and quantity supplied using the graph below: (Which direction does the curve follow for quantity supplied?) Price Quantity Supplied 4) Following the model for quantity supplied demonstrated in the graph above, come up with the quantity demanded and complete this supply schedule? (You can pick any quantity supplied as long as it fits the relationship between price and quantity supplied) Price Quantity Supplied
40
20 5) Why would the supplier want to keep the supply low for a
The Correct Answer and Explanation is:
Law of Supply Worksheet – Answer Key and Explanation
1) Which group are we talking about with supply curves, producers or consumers?
Answer: Producers
2) What is the relationship between price and the quantity supplied?
Answer: As the price increases, the quantity supplied increases. As the price decreases, the quantity supplied decreases. This is a direct relationship.
3) Demonstrate this relationship of price and quantity supplied using the graph below:
Since there is no actual graph to view here, we describe the supply curve:
Answer: The supply curve slopes upward from left to right, indicating that as price increases, quantity supplied also increases.
4) Supply Schedule (example based on the law of supply):
| Price | Quantity Supplied |
|---|---|
| 10 | 100 |
| 20 | 200 |
| 30 | 300 |
| 40 | 400 |
| 50 | 500 |
5) Why would the supplier want to keep the supply low for a certain price?
Answer: If the market price is low, the supplier may want to limit supply to avoid selling at a loss or low profit. Reducing supply can also help maintain scarcity, which may lead to higher prices in the future.
📘 Explanation
The law of supply is a fundamental principle in economics that explains the behavior of producers in the marketplace. Supply curves specifically deal with producers—the individuals or companies that create and sell goods or services. The main idea is straightforward: there is a direct relationship between the price of a product and the quantity that producers are willing to supply. When prices go up, suppliers are more motivated to produce and sell more because it becomes more profitable. Conversely, if prices fall, the incentive to supply decreases, since profits shrink or even turn into losses.
Graphically, this relationship is shown as an upward-sloping supply curve. As you move from left to right on the graph, the price goes up, and so does the quantity supplied. This trend is reflected in the supply schedule provided in question 4, where each increase in price is matched by a higher quantity of goods supplied.
In question 5, the supplier’s decision to keep supply low at a lower price is a strategic one. If prices are low, increasing supply can actually hurt the business by leading to lower revenue or even unsold inventory. By limiting supply, producers can sometimes maintain value or wait for the market price to improve. This is particularly important in industries like agriculture or luxury goods, where overproduction can cause price crashes.
Understanding this concept helps explain many real-world business strategies and market behaviors.
