The graph shows the price of a good compared to the quantity supplied. A graph titled Supply of Cars has Quantity Supplied on the x-axis, from 0 to 10, and Price in thousands of dollars on the y-axis, from 0 to 30. Point (S 1, P 1) is at (3, 20) and points (S 2, P 2) is at (8, 25). This graph demonstrates how

The graph is the pictorial representation of two variables that are interrelated to each other based upon the functional equation. In economics, graphs are prepared to show the reflecting impact of change in the independent variable over the dependent variable.

The graphs demonstrated how the chance in price influences the quantity supplied.

As per the graph, the points S1 and P1 show the quantity supply of 3 units with the price of $20 per unit. Similarly, at points S2 and P2, the units supplied are 8 units while the price for each unit is $25.

The gap between point 1 and point 2 shows that there is a 25% increase in the price of products and the quantity supplied has also increased from 3 units to 8 units that are 106%. The operational effect is the use of the law of supply.

The law of supply states that the higher the price of the goods higher will be the quantity supplied. Under the law of supply, there is a direct relationship between price and demand.

To know more about the law of supply, refer to the link:

link

This graph demonstrates how price influences the quantity supplied.

Explanation:

At point (S1, P1), the supplied quantity was 3 units when the price was $20 per unit.   At point (S2, P2) when the price increased to $25 per unit (25% increase), the quantity supplied increased to 8 units (more than 106% increase).  What is operational here is the law of supply.

The law of supply in Economics says that the higher the price, the higher the quantity supplied.  Price has a positive relationship with supply unlike it has with demand.  Suppliers are always willing to supply more of a good or service when the price per unit is high.  This is not the situation when the price is low.  It is important to point out that this law of supply is an assumption that all other factors, for example, production capacity, capital resources, labor, etc.) affecting supply is constant, and that price is the only variable affecting supply.  The price elasticity of supply is more than 1, meaning that supply is highly elastic with respect to price.