Question #187ea
1 Answer
Oct 1, 2015
Refer explanation section
Explanation:
Upward sloping supply curve shows a positive relation between price and quantity supplied.
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A higher price acts as in incentive for the producer to produce more. Resources are diverted from less profitable use to more profitable use. Hence more is supplied at a higher price.
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In production, after a certain stage the Law of diminishing returns will operate. The cost will start increasing. At that stage, supply can be expanded with a rise in price.
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It is a geometrical necessity. only a curve of this shape alone can show the positive relation between price and supply.
