Q:

Why does the supply curve slope upward?

A:

Quick Answer

The supply curve slopes upward because the volume suppliers in an industry are willing to produce increases as the price the market pays increases. Under typical circumstances, the revenue and profit derived by a supplier increases as the market price rises.

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Full Answer

On a supply cover, the vertical axis shows various price points for the product or industry being depicted. The horizontal axis represents the relative quantity of goods suppliers will produce. To demonstrate the law of supply, a person must increase the supply volume while increasing the price. This requirement dictates that the slope curves upward.

Producers in a given industry must compare the opportunity cost of supplying one good against the opportunity cost of supply another. If the market price for one good is relatively small compared to the market price of another good at a similar output, the producer will opt to supply more of the first good. If the price of "widget A" goes up from $5 to $7, while "widget B" remains at $5, the producer has increased incentive to offer more of "widget A" to the market.This incentive is depicted as an upward-sloping curve.

Another reason producers supply more goods as prices increase is that margins are typically better at higher prices.

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