Law of Supply

Holding all other factors that can affect the quantity supplied constant, the quantity supplied of a good increases when its price increases, and conversely, the quantity supplied decreases when its price decreases.

Law of Supply and the Slope of the Supply Curve

The positive slope of the supply curve is a consequence of the law of supply because it reflects the positive relationship between price and quantity supplied. This slope indicates how the quantity supplied varies with changes in price.

Calculating the slope of the supply curve:

The slope \( m \) of the line passing through the points \((200, 40)\) and \((400, 60)\) is calculated using the formula:

\[ m = \frac{y_2 - y_1}{x_2 - x_1} \]

Substituting the values of the points \((x_1, y_1) = (200, 40)\) and \((x_2, y_2) = (400, 60)\):

\[ m = \frac{60 - 40}{400 - 200} = \frac{20}{200} = 0.1 \]

The positive sign of the slope of the supply curve is consistent with the law of supply. The slope can be used to answer the question, "How does a change in price affect the quantity supplied?" In this specific case, for an increase of 1 in price, the quantity supplied increases by 10 units. Conversely, for each decrease of 1 in price, the quantity supplied decreases by 10 units.