A. What are the supply schedule and the supply curve and how are they related? I

Question

A.   What are the supply schedule and the supply curve and how are they related? In our last class, we explained two reasons why the supply curve slopes positively. One is the law of supply, the other one is profit. State and explain a third reason.

B.   Does a change in producers’ technology lead to a movement along the supply curve or to a shift in the supply curve? Does a change in price lead to a movement or to a shift in the

        supply curve?

      C. Define the equilibrium of a market. Describe the forces that move a market toward its equilibrium.

Explanation / Answer

First question has been answered below-

A) A supply schedule is a table that shows positive relationship between quantity supplied and price. It tells us different levels of quantity supplied at various prices.

Supply curve is a graphical presentation of supply schedule which dipicts the positive relationship between prices and quantity supplied.

Supply curve is derived from supply schedule by plotting the combinations of price and quantity supplied given in the schedule.

The third reason for upward sloping supply curve is COST OF PRODUCTION.

When quantity produced increases, cost increases due to diminishing returns to factors or falling marginal productivity by adding more factors to production. To combat increasing cost of production, price increases. This creates the positive relationship between quantity supplied and price.

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