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Here, the laws of supply and demand are fundamental principles in economics that describes the relationship between the price of a good or service and the quantity supplied or demanded by the producers and consumers respectively.
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The law of supply states that all else being equal the quantity supplied of a good or service increases as its price increases and quantity supplied is represented graphically by a supply curve which slopes upwards from left to right.
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There are few reasons why the supply curve slopes upward because of the profit motive, when the price of a good or service increases it becomes more profitable for producers to supply more of that good or service to the market.
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Higher prices provide an incentive for producers to increase the production to maximize their profits.
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Opportunity cost is also one of the reasons why the supply curve slopes upward.
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This is because producers often face trade -offs in allocating their resources.
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When the price of a particular good or service rises, it may become more profitable than alternative uses of resources.
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The third reason why the supply curve slopes upwards due to increasing marginal costs.
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In many cases producing additional units of goods or services becomes more expensive as production increases.
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The phenomenon is known as increasing marginal costs.
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Therefore, producers require higher prices to cover the increased costs associated with the expanding production.
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These are the reasons why the supply curve slopes upward.
03:24
Moving further towards the law of demand, the law of demand states that all else being equal the quantity demanded of a good or service decreases as its price increases.
03:38
The quantity demanded of a good or service decreases as its price increases.
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The relationship between the price and quantity demanded is represented graphically by the demand curve which slopes downward from left to right...
