The Supply Curve

Abstract

WE have now completed our analysis of price and output for a single firm. We must next discuss the supply curve of a commodity produced by a number of firms. The supply curve for a commodity represents a list of amounts of the commodity which will be associated with various prices. A supply curve tells us that if such and such an output is to be produced, this will be the price. And if the conditions of demand are such that this amount of the commodity is demanded at this price, then this is the output that will be produced. We can imagine that we move along the supply curve by means of successive increases of demand. As the amount demanded increases, the supply price may rise, remain constant, or fall, but each separate amount has a certain price which it is necessary to pay in order to call forth that amount of output. If the price secured by the sale of this amount of output were less, a smaller output would be produced. And if a higher price were secured by the sale of this output, a larger output would be produced. In every case a larger total sum must be offered to call forth a larger total output. A larger output will cost a larger total sum to produce, and a larger total offer must be made in order to procure it. This must be true even though average cost may fall as output increases.