Supply
Swag & Co is a company that makes only white sneakers.
We want to know how many white sneakers Swag & Co will produce at different prices. If white sneakers are selling for $200, Swag & Co would make a lot of money so they would be willing to make (supply) 3 pairs at that price. At a price of $150 they would not be making as much money so they would only make 2 pairs. At a price of $100 they would barely be making any money selling white sneakers so Swag & Co would only supply 1 pair.
We can make Supply Schedule which shows the relationship between the price and the quantity supplied.
| Price of White Sneakers ($) | Quantity Supplied |
|---|---|
| $100 | 1 |
| $150 | 2 |
| $200 | 3 |
Let’s graph this table out. Our Y-axis is going to be price; the same as it was when we graphed a demand schedule. Our X-axis this time will be quantity supplied.
When we plot our points, we get the following output...
At a price of $200, Swag & Co is willing to supply 3 white sneakers. This point is shown as a red dot.
At a price of $150, Swag & Co is willing to supply 2 pairs of white sneakers. This point is shown as a red dot.
At a price of $100, Swag & Co is willing to supply 1 pair of white sneakers. This point is shown as a red dot.
...which results in the following linear relationship!
Notice how the supply curve is sloped upwards. This showcases a very key economic concept: Law of Supply!
The Law of Supply states that holding everything constant, when the price of a product increases, the quantity supplied increases.