Law of Supply with Example- Explained easy
What is the Law of Supply
Microeconomics law of supply states that all other factors remain constant, as the price of good or service increases and the number of goods or services that supplier provides will also increase, and vice versa. Further, the law of supply says that, as the price of things increases, suppliers will try to maximize their profits by increasing the quantity of supply of goods for sale.
Breaking out the details of Law of Supply with Example
The law of supply has been defined from the chart, the supply curve, which is upward sloping. A, B, and C are points on the supply curve. Each point on the curve reflects a direct correlation between quantities supplied (Q) and price (P). So, at point A, the quantity supplied will be Q1 and the price will be P1, and so on.
The supply curve is upward sloping because suppliers can select how much of their goods to produce and later fetch to the market. At any point given in time, however, the supply of goods that sellers fetch to the market is stable and sellers merely make a decision either to sell or withhold their stock from a sale.
Consumer demand established the price and vendors can only charge what the market will endure. Suppose, if the demand of consumers increases over time, the price will also increase, and then the supplier can choose dedicated new resources of production, which increase the quantity of supply. Demand eventually established the price in a competitive market and suppliers respond to the price which they expect to receive sets of the quantity supplied.
Law of Supply Example
Face Mask, in recent Covid-19 impact, use of face mask was made necessary, as it keeps us safe from virus. So, the people started buying as many face masks. Hence, suppliers started increasing the production of face masks, so they may generate more profit from Face Mask.