Law of supply

The law of supply is a fundamental principle of economic theory which states that, keeping other factors constant, an increase in sales price results in an increase in quantity supplied.[1] In other words, there is a direct relationship between price and quantity: quantities respond in the same direction as price changes. This means that producers and manufacturers are willing to offer more of a product for sale on the market at higher prices, as increasing production is a way of increasing profits.[2]

In short, the law of supply is a positive relationship between quantity supplied and price, and is the reason for the upward slope of the supply curve.

Some heterodox economists, such as Steve Keen and Dirk Ehnts, dispute the law of supply, arguing that the supply curve for mass-produced goods is often downward-sloping: as production increases, unit prices go down, and conversely, if demand is very low, unit prices go up.[3][4]

  1. ^ Mas-Colell, Andreu; Whinston, Michael D.; Green, Jerry R. (1995). Microeconomic theory. New York, NY: Oxford Univ. Press. p. 138. ISBN 978-0-19-507340-9.
  2. ^ "Principles of Microeconomics, v. 1.0 | Flat World Knowledge". 2012-06-23. Archived from the original on 2012-06-23. Retrieved 2023-04-20.
  3. ^ Ehnts, Dirk (April 29, 2019). "The problem with the supply curve". econoblog101. Retrieved October 18, 2022.
  4. ^ Keen, Steve (2011). "Chapter 5: The price of everything and the value of nothing". Debunking Economics: The Naked Emperor Dethroned?. Zed Books. ISBN 978-1848139923.