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Questions
Give two reasons for the positive slope of the supply curve.
Explain why more is supplied at a higher price.
Short/Brief Note
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Solution
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
- An increase in price, other things being equal, increases the profit margin and hence quantity supplied.
- An increase in price attracts the new firms to enter the market to produce this commodity so as earn profits.
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