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Glossary

The supply curve shows how the quantity of a good supplied depends on the price. According to the Law of Supply, as the price of a good falls, the quantity supplied falls. Therefore, the supply curve slopes upward to the right. Remember sUPply goes UP. As was true with the Law of Demand, events can take place that cause the supply curve to shift indicating either an increase or a decrease in supply. Study the following economics terms and note that although each sounds similar, the terms represent very different aspects of economics.

  1. Supply: The amount of a product that would be offered for sale at all possible prices that could prevail in the market.
  2. Law of Supply: The principle that suppliers will normally offer more for sale at higher prices and less at lower prices. A law that states that, other things equal, the quantity supplied of a good falls when the price of the good falls. The relationship between price and quantity supplied is, therefore, direct.
  3. Supply Curve: A curve that shows the relationship between the price of a good and the quantity supplied of a good. The supply curve is UPWARD sloping to the right. Remember...supply goes up.
  4. Individual Supply Curve: A graph showing various quantities that a single producer is willing to sell at various levels of price, during a given period of time.
  5. Market Supply Curve: A graph showing the quantity offered at various prices by all producers that offer the product for sale.
  6. Supply Schedule: A table that shows the relationship between the price of the good and the quantity supplied of that good. The labels in the schedule or table will be the exact labels you will use when constructing the supply graph.
  7. Elasticity: A measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price.