Supply Curve
IntermediateA supply curve is a graph showing the relationship between the price of a good and the quantity producers are willing to supply at each price, with all other factors held constant.
On a typical supply curve, price is shown on the vertical axis and quantity on the horizontal axis. The curve usually slopes upwards from left to right, because higher prices encourage producers to supply more.
For example, a bakery might be willing to supply 100 loaves a day at 2 each, 150 loaves at 2.50 and 200 loaves at 3. Plotting these points gives a rising supply curve.
Movement along the curve happens when the product's own price changes. The whole curve shifts when other factors change. If flour becomes more expensive, the bakery's costs rise and it will supply fewer loaves at each price, so the curve shifts to the left. If new ovens make baking cheaper, it will supply more at each price, and the curve shifts to the right.
The steepness of the supply curve reflects how responsive producers are to price changes, which is measured by the price elasticity of supply.
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