Question

Give two reasons for the positive slope of the supply curve.

Explain why more is supplied at a higher price.

Answer 1

Positive slope of the supply curve shows the direct relationship between price and quantity supplied.

Two reasons for the positive slope of the supply curve are

1. An increase in price, other things being equal, increases the profit margin and hence quantity supplied.
2. An increase in price attracts the new firms to enter the market to produce this commodity so as earn profits.