Asked Dec 11, 2019

Explain using words and graphs of how the supply curve is derived( where do they come from)?


Expert Answer

Step 1

Supply curve grapically represents the correlation between cost of goods and quantity supplied. Typically,  Price P forms the vertical axis and quantity supplied Q is at the horizontal axis. The relationship between price and quantity supplied is positive. As price increases, producers want to take advantage of increase in price and produce more. This results in increase in supply. Therefore, the common trend is that supply increases when price increases if everything else is constant.


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Step 2

Supply curve will shift right when factors other than price and quantity change. For an instance, if there are new entrants in the market, production (and supply) will increase even when there is no change in price. Increase in supply will shift the curve...


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