What defines the law of supply in microeconomics?

The law of supply in microeconomics states that as the price of a good increases, the quantity supplied also increases, all else being equal.

The law of supply is a fundamental principle in microeconomics that describes the direct relationship between the price of a good and the quantity of it that producers are willing to supply. It is based on the assumption that producers aim to maximise their profits. When the price of a good rises, producers are incentivised to produce more of it because they can earn more revenue from its sale. Conversely, if the price of a good falls, producers may reduce the quantity they supply because the potential profit is less attractive.

This law is typically represented graphically with price on the vertical axis and quantity on the horizontal axis. The supply curve slopes upwards from left to right, illustrating that as price increases, so does the quantity supplied. This upward slope reflects the positive relationship between price and quantity supplied, as dictated by the law of supply.

However, it's important to note that the law of supply holds true only when all other factors are held constant (ceteris paribus). These other factors can include the cost of inputs, technology, expectations about future prices, and the number of sellers in the market. If any of these factors change, the entire supply curve can shift. For example, if the cost of inputs rises, the supply curve may shift to the left, indicating a decrease in supply at every price level.

In summary, the law of supply is a key concept in microeconomics that explains how changes in price influence producers' decisions about how much of a good to supply. It is a crucial tool for understanding market dynamics and predicting how changes in price will affect the quantity of goods produced and available in the market.