Law of Supply
Definition
The law of supply states that as the price of a good or service increases, the quantity supplied by producers also increases, and vice versa.
Analogy
Think of a lemonade stand. When the price of lemons goes up, the lemonade stand owner will be motivated to produce more lemonade because they can make a higher profit. But if the price of lemons goes down, they might not be as motivated to produce as much.
Related terms
Market Supply: The total quantity supplied by all producers in a market at different prices.
Elasticity of Supply: Measures how responsive the quantity supplied is to changes in price.
Producer Surplus: The difference between what producers are willing to sell a good for and what they actually receive.
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