When does supply curve slope upward?
The positively sloping supply curve is based upon two important assumptions.
Firstly producers or sellers aim to maximize profits from production and sale
of a commodity.
Secondly,
as output of a commodity is expanded the additional cost of producing an extra
unit gees up due to diminishing returns to variable factors.
As
seen above, the quantity supplied of a commodity occurs in response to the
change in its price. At a higher price more quantity of it is supplied and
vice-versa.
Graphically:-
For
above all these reasons the slope of the supply curve is positive. In figure,
SS’ serve denotes the supply curve, which shows the positive relationship
between price and quantity. For this reason, the slope of the supply curve is
upward and positive.
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