The supply curve slopes upward because the volume suppliers in an industry are willing to produce increases as the price the market pays increases. Under typical circumstances, the revenue and profit derived by a supplier increases as the market price rises.Continue Reading
On a supply cover, the vertical axis shows various price points for the product or industry being depicted. The horizontal axis represents the relative quantity of goods suppliers will produce. To demonstrate the law of supply, a person must increase the supply volume while increasing the price. This requirement dictates that the slope curves upward.
Producers in a given industry must compare the opportunity cost of supplying one good against the opportunity cost of supply another. If the market price for one good is relatively small compared to the market price of another good at a similar output, the producer will opt to supply more of the first good. If the price of "widget A" goes up from $5 to $7, while "widget B" remains at $5, the producer has increased incentive to offer more of "widget A" to the market.This incentive is depicted as an upward-sloping curve.
Another reason producers supply more goods as prices increase is that margins are typically better at higher prices.Learn more about Economics
The demand curve for a monopolist slopes downward because the market demand curve, which is downward sloping, applies to the monopolist's market activity. Demand for the monopolist's product increases as its price decreases. According to Boundless, an educational resource website, the downward sloping demand curve contributes to market inefficiency, which leads to excess production capacity and a loss of consumer surplus.Full Answer >
The aggregate demand curve, which illustrates the total amount of goods and services demanded in the economy at a given price level, slopes downward because of the wealth effect, the interest rate effect and the net exports effect, according to CliffsNotes.com. The curve measures the price level on the vertical axis and gross domestic product (GDP) on the horizontal axis.Full Answer >
The slope and elasticity of a linear demand curve are extremely closely linked, but where the slope itself is just a measure of how much demand changes given a change in price, elasticity is a description of what that slope means. Elasticity relates slope to the profitability of price changes.Full Answer >
An upward sloping demand curve indicates that demand for a good or service increases as price increases. Upward sloping demand curves are the result of conspicuous consumption and products known as “Giffen goods.”Full Answer >