Buy custom Analysing Current Economic Issues
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| Topic: |
Business
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| Number of pages / Number of words: |
5 / 1146 |
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The supply theory can be represented in a graph which unlike the law of demand, the supply correlation shows an upward slope.
At point A, the price is at P1 and the quantity supplied is at Q1. If the price of a product is low, the quantity supplied would be low as producers will have less incentive to supply the product in the market as they will make not make a profit...
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At point C, the price is at P3 and the quantity supplied is at Q3. As price increases from P1 to P3, quantity supplied will consequently move to Q1 to Q3. This leads to a tension between price and quantity supplied by the producers and the consumers (who play a major role in dictating price). Hence, market forces will eventually shift to point B where the price at P2 can meet quantity supplied at Q2 (equilibrium)...
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