Chapter 3 Appendix Outline |
IV. THE LAW OF SUPPLY |
A. The Law of Supply and Producer Behavior |
| 1. A supply curve shows the quantities producers plan to sell at all possibleprices.
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| 2. The supply curve also shows the lowest marginal cost of producing each unitof the product. |
| a. A single point on this curve refers to quantity supplied. |
| | 1. Quantity supplied refers to the quantity that producers plan to sell ata particular price. |
| b. The positive slope of the supply curve reflects the law of supply. |
| | 1. The law of supply states that more will be sold only if price increases. |
| | 2. The basis of the law is that as additional units of a good areproduced, marginal cost rises. |
| | a. Since it costs more to produce additional units, producers will sell more only if they receive a higher price. |