Law of Supply
The Law of Supply states that other things remaining constant, the quantity supplied of a good increases when its price increases, and decreases when its price falls.
In simple terms, price and quantity supplied move in the same direction.
This law is based on the producer’s motive of earning profit. When the price rises, producing and selling more becomes profitable, so producers increase supply. When the price falls, profit decreases, so producers reduce supply.
The law of supply can be represented through:
Supply Schedule – A table showing how supply changes at different prices.
Supply Curve – An upward-sloping curve that shows the direct relationship between price and quantity supplied.
Thus, the Law of Supply highlights that higher prices encourage producers to supply more, whereas lower prices discourage production.