Law of Supply
The law of supply is an economic principle that states that, all other factors being equal, an increase in the price of a good or service will have a corresponding direct increase in the supply of that good or service. This is because suppliers are more likely to produce and sell a good or service at a higher price than at a lower price. The law of supply is one of the most fundamental principles of economics and is related to the concept of supply and demand.
History of the Law of Supply
The law of supply was first proposed by Adam Smith in his 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations. Smith argued that the price of a good or service is determined by the interaction of supply and demand in a free market. He proposed that when the price of a good or service increases, suppliers are more likely to produce and sell that good or service, thus increasing the supply. This is because suppliers are more likely to make a profit when the price of a good or service is higher.
Comparison Table
| Price | Supply |
|---|---|
| Low | Low |
| High | High |
Summary
The law of supply is an economic principle that states that, all other factors being equal, an increase in the price of a good or service will have a corresponding direct increase in the supply of that good or service. This is because suppliers are more likely to produce and sell a good or service at a higher price than at a lower price. The law of supply is one of the most fundamental principles of economics and is related to the concept of supply and demand. For more information about the law of supply, you can visit websites such as Investopedia, The Balance, and Khan Academy.
See Also
- Law of Demand
- Supply and Demand
- Price Elasticity of Supply
- Price Elasticity of Demand
- Marginal Cost
- Marginal Revenue
- Average Cost
- Average Revenue
- Opportunity Cost
- Economic Equilibrium
