What is the supply curve?

A supply curve is a graphical representation of the correlation between the

cost of a good or service and the quantity supplied in a given period. In a typical illustration, price is
shown on the left vertical axis, while quantity supplied is shown on the horizontal axis.

The law of supply

How the supply curve works

The supply curve moves up from left to right, which expresses the law of supply: when the price of a
particular good rises, the quantity supplied increases (all else being equal). Note that this formulation
means that price is the independent variable and quantity is the dependent variable. In most disciplines,
the independent variable appears on the horizontal or x-axis, but economics is an exception to this rule.
If any factor other than price or quantity changes, a new supply curve must be drawn. For example,
suppose new soybean growers enter the market, clearing forests and increasing the land used for
soybean cultivation. In this scenario, more soybeans are produced even if the price remains the same,
which means that the supply curve itself shifts to the right in the graph below (S2). In other words,
supply increases. Technology is the main cause of changes in the supply curve. Other factors can also
shift the supply curve, such as a change in the price of output. If a drought causes the price of water to
rise, the curve shifts to the left (S3). If the price of a substitute such as corn - from the supplier's point of
view - increases, farmers will substitute it to grow and the supply of soybeans will decrease (S3). If a
new technology, such as a pest-resistant seed, increases yields, the supply curve will shift to the right
(S2). If the future price of soybeans is higher than the current price, supply will temporarily shift to the
left (S3) because

Example of a supply curve

When the price of soybeans rises, farmers are encouraged to plant less corn and more soybeans, and
the total number of soybeans on the market increases.

The extent to which rising prices translate into an increase in quantity is called elasticity of supply or
price elasticity of supply. If a 50% increase in the price of soybeans increases the quantity of soybeans
produced by 50%, the elasticity of supply for soybeans is 1. On the other hand, if a 50% increase in
soybeans increases the quantity supplied by only 10%, the elasticity of supply for soybeans is 1. The
elasticity of supply is 0.2. The supply curve is lower (closer to horizontal) for products with more elastic
supply and steeper (closer to vertical) for products with less elastic supply. Special considerations

The terminology surrounding the offer can be confusing. "Quantity supplied" or "amount supplied"
refers to quantities of a good or service, such as tons of soybeans, bushels of tomatoes, available hotel
rooms, or hours of labor. In everyday use, this may be called "supply", but in economic theory, "supply"
refers to the above curve that expresses the relationship between quantity supplied and unit price.
Other factors, such as technology, can also cause changes in the supply curve. Any progress that
increases production and makes it more efficient can cause the supply curve to shift to the right. The
curve can also be affected by market expectations and the number of sellers (or competition).