THE SUPPLY CURVE: THE RELATIONSHIP BElWEEN PRICE AND QUANTITY SUPPLIED

The quantity supplied of any good or service is the amount that sellers are wiIling and able to sell. There are many determinants of quantity supplied, but once again, price plays a special role in our analysis. When the price of ice cream is high, selling ice cream is profitable, and so the quantity supplied is large. Sellers of ice cream work long hours, buy many ice cream machines, and hire many workers. By contrast, vhen the price of ice cream is low, the business is less profitable, and so sellers produce less ice cream. At a low price, some sellers may even choose to shut down, and their quantity supplied falls to zero. Because the quantity supplied rises as the price rises and falls as the price falls, we say that the quantity supplied is positively related to the price of the good. This relationship between price and quantity supplied is called the law of supply. Other things equal, when the price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied falls as well.

At various prices of ice cream. At a price below $1.00, Ben does not supply any ice cream at all. As the price rises, he supplies a greater and greater quantity. This is the supply schedule, a table that shows the relationship between the price of a good and the quantity supplied, holding constant everything else that influences how much producers of the good want to sell.

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