6 of 7

Write now Article Tools

Page 2 of 2

its quantity supplied will rise also, and as they fall, its quantity supplied will fall.

A supply curve is a graphical representation of supply and it slopes upward. On the supply graph, the price is plotted on the vertical axis and the quantity supplied is plotted on the horizontal axis.

A change in price will results in a movement along a fixed supply curve, and a change in any other variables other than the price that influences quantity supplied produces a shift in the supply curve.

If the supply curve shift to the right or left, it will results in a higher equilibrium price and a higher or lower equilibrium quantity. If the cost of input material falls, the technology increases, and/or the size of the industry increases, the supply curve will shifts to the right. If the government imposes some policies, it will shift either the demand or the supply curve, thus changing the equilibrium. Government may impose certain policies to control the price of goods and services charged by suppliers through price ceiling. This might be done in a way to control inflation.

A price ceiling is legal maximum price that can be charged for goods and services by suppliers, and it might results in a shortage, equilibrium with shortage, price discriminations, and evasion because of excess demand from consumers and the absence of market forces and market price interaction.

On the other hand, government might impose a price floor, which is also a legal minimum price that can be charged for goods and services by suppliers to control the economy. A price floor might result in a surplus.

Works Cited:

Text Book Perloff, Jeffrery M., "Microeconomics Second Edition"
Text Book Colander, David C., "Economics Fourth Edition"

Learn more about this author, Jeanie Pitner.
Click here to send this author comments or questions.

• << previous page
• 1
• 2

Add your voice

Know something about The concept of price in economics?
We want to hear your view. Write now!