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Questions
What are the reasons for upward sloping supply curve?
Give any two reasons for the upward slope of a supply curve.
Explain any two reasons for the upward slope of the supply curve.
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Solution
The law of supply states that there is a positive relationship between the price of a product and the quantity that producers are willing to supply. This is shown by an upward-sloping supply curve.
This happens mainly due to two reasons:
- Higher Prices Mean More Profit: When the price of a product increases, producers can earn more profit. This encourages them to produce and sell more of that product, assuming other factors remain constant.
- Increasing Cost of Production: As the production of goods increases, the marginal cost (cost of producing each extra unit) also increases. To cover this higher cost, producers are willing to supply more only at a higher price.
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