Explain why the supply curve slopes upward.

The supply curve slopes upward due to the relationship between price and quantity supplied. Here's a breakdown of the reasons:

Step 1: Define the Problem

Identify why the supply curve, which represents the relationship between the price of a good and the quantity supplied, typically slopes upward.

Step 2: Break Down the Problem

1. Law of Supply: Understand the basic economic principle that as the price of a good increases, producers are willing to supply more of it.
2. Producer Incentives: Analyze how higher prices incentivize producers to increase production.
3. Cost of Production: Consider how increasing production often leads to higher costs, requiring higher prices to cover these costs.

Step 3: Apply Relevant Concepts

• Law of Supply: This economic principle states that there is a direct relationship between price and quantity supplied.
• Marginal Cost: As production increases, the cost to produce each additional unit (marginal cost) tends to rise, necessitating higher prices.
• Profit Maximization: Producers aim to maximize profits, and higher prices can lead to higher potential profits, encouraging increased supply.

Step 4: Analysis, Verify and Summarize

• Producer Behavior: When prices rise, producers are more motivated to increase supply because the potential for higher revenue and profit increases.
• Cost Considerations: As production expands, producers may face higher marginal costs due to factors like overtime pay, resource limitations, or the need for additional equipment, which justifies higher prices.

Final Answer

The supply curve slopes upward because, according to the law of supply, higher prices provide an incentive for producers to supply more of a good. This is due to the potential for increased profits and the need to cover rising marginal costs associated with higher levels of production.