Law of Supply

• Concept: Higher prices encourage producers to make more goods. Lower prices discourage production.
• Why? Higher prices mean higher profit, so firms expand supply.

Example:

• If wheat price = $100/ton → farmers produce 50 tons.
• If wheat price = $150/ton → farmers produce 80 tons.

Graph:

• Price on Y-axis, Quantity on X-axis.
• Supply curve slopes upward.

Key Insight: Producers respond positively to price increases.