Definition: Law of supply states that other factors remaining constant, price and quantity supplied of a good are directly related to each other. In other words, when the price paid by buyers for a good rises, then suppliers increase the supply of that good in the market. law of supply. the principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease; directly related. Th main reasons for operation of law of supply are:
Profit Motive: The basic aim of producers, while supplying a commodity, is to secure maximum profits. ...
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Backward Countries; The Law of Supply states that: as prices rise, the quantity supplied increases. as prices fall, the quantity supplied decreases. The law of supply ensures that producers make the most money possible. When goods sell for a higher price, producers tend to make more money. The law of supply states that the quantity of a good supplied (i.e., the amount owners or producers offer for sale) rises as the market price rises, and falls as the price falls. Conversely, the law of demand (see demand) says that the quantity of a good demanded falls as the price rises, and vice versa. The law of supply summarizes the effect price changes have on producer behavior. For example, a business will make more video game systems if the price of those systems increases. The opposite is true if the price of video game systems decreases. Price is what the producer receives for selling one unit of a good or service. ... Economists call this positive relationship between price and quantity supplied—that a higher price leads to a higher quantity supplied and a lower price leads to a lower quantity supplied—the law of supply. Supply is a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers. Supply can relate to the amount available at a specific price or the amount available across a range of prices if displayed on a graph. Alfred Marshall. After Smith's 1776 publication, the field of economics developed rapidly, and refinements were to the supply and demand law. In 1890, Alfred Marshall's Principles of Economics developed a supply-and-demand curve that is still used to demonstrate the point at which the market is in equilibrium. Key Takeaways. Supply and demand are both important for the economy because they impact the prices of consumer goods and services within an economy. According to market economy theory, the relationship between supply and demand balances out at a point in the future; this point is called the equilibrium price. Definition: Law of supply states that other factors remaining constant, price and quantity supplied of a good are directly related to each other. In other words, when the price paid by buyers for a good rises, then suppliers increase the supply of that good in the market.
