The law of supply states that, as the price of a commodity rises, so does the quantity supplied, ceteris paribus. As the price falls, the quantity supplied also falls, ceteris paribus.

Figure 3.2

Above is a supply curve; it shows the relationship between price and quantity supplied, ceteris paribus.

The supply curve is a graphical representation of the law of supply, and shows that, when the price of a commodity is low at P₁, the quantity supplied will also be low at Q₁. As the price of the commodity increases to P₃, the quantity supplied also increases to Q₃.

Note:

1. Because the quantity supplied increases as price increases, the supply curve has a positive slope.

2. The change in price results in a movement along the supply curve.