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Question
With the help of a diagram state whether supply of a good is directly or inversely related to price?
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Solution
The law of supply states that the supply of a good changes directly with its price, other factors influencing supply, remaining unchanged. This can be explained with the help of a diagram.
In the diagram, quantity supplied is measured on the x-axis and price along the y-axis. We find that at price OP, quantity supplied is OQ. At a higher price of OP1, the firm is willing to sell OP1 quantity of the good. And at a price lower than OP say OP2, the firm is willing to supply only lesser quantity i.e. OQ2.
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