Supply CurveA supply curve illustrates the relationship between price and quantity of supply for a product, service, commodity, asset, currency or other types of value such as labor.Supply curves have many shapes. In the example above, the supply curve slopes steeply upwards indicating that greater and greater price increases are required to stimulate more supply. This is typically due to constraints and limits on supply. For example, the supply of oranges may initially originate in a climate that is ideal for growing oranges. As the price rises, farmers will grow it in less hospitable climates raising the supply at greater and greater costs.
DemandSupply is often modeled with a demand curve that shows the quantity demanded by the market at different price levels.Demand typically slopes downward as there is more customer demand at a lower price. This can be quite a steep curve. For example, enthusiasts of a new technology may be willing to pay a quite high price for it. Whereas average users of the technology might only buy at a far lower price.
Commodity PricesCommodities are goods and services for which individual buyers and sellers have little influence over price and must accept the market price. In the example below, suppliers are willing to provide 63 million tons of apples at a price of $303 a ton. At a higher price, farmers will devote more resources such as land, labor and capital to apples and the supply increases.
Labor SupplyWorkers with a particular skill set are willing to provide 1.4 million hours of labor at a salary of $100,000. As the salary goes up more people will acquire the skill set and supply of available workers increases.trade war results in a sudden drop in supply due to high import tariffs for a good. This results in an increased price and less consumption of the good as the equilibrium shifts from e1 to e2.
|Overview: Supply Examples
The value that market participants such as firms and individuals are willing to provide at a price level.