A
graph showing the hypothetical
supply of a
product or
service that would be available at different
price points. The supply curve usually slopes upward, since higher prices give
producers an
incentive to supply more in the hope of making greater
revenue. In the
short run the price-supply
tradeoff is greater than in the long run. In the short run, an increase in price will usually cause an increase in supply, but the
leading producers can only manage a limited increase. However, in the longer term, new producers enter the
market attracted by higher prices, and the supply at each price increases more significantly. In theory, in the most extreme
cases, supply can be totally unreactive to price (special cases of very uncompetitive
markets), or supply can be infinite at a particular price (e.g. a highly
competitive market).
