When considering a market’s supply side, the products are sold to the consumers by the firms. There is always uncertainty attached with the quantity of products that a firm is willing to produce and sell. There are a number of variables that a firm considers before taking the decision on the quantity of the products it is willing to produce, such as, the product’s price, the workers’ remuneration, the cost of the raw materials, and the cost of capital, technology used in producing the products, the future prices and the expectation of the producer.
According to the law of supply, the quantity supplied is greater, when the product’s price is greater, under the assumption that other things remain constant. In the same way, the quantity supplied is smaller; when the product’s price is lower, under the assumption that other things remain constant. The result of the law of supply is the tendency that when quantity produced increases, there is propensity of the marginal cost to increase producing a good and service. There is willingness of the producers in supplying a good, only if it is possible in covering the production’s marginal cost.
Being consistent with the law of supply, there is positive slope for the individual supply curve. Explaining the positive slope, it is the way a firm can be responding to the price increase. As the price becomes higher, there is encouragement for a firm in increasing its output with the hire of more labor and purchase of more raw materials. It often happens that in the endeavor of increasing the employee strength, a firm is compelled in paying overtime or hiring less productive or more expensive workers than the ones who were there originally. The supply curve can be showing the production’s marginal cost for the different quantities produced. The marginal principles can be used to be explaining this.
When explaining a particular product’s market supply curve, the focal point is the relationship between quantity of the products that all producers are willing to sell together and the price of the products. This concept is known as ceteris paribus. The market supply curve is drawn with the assumption that all other variables affecting the individual supply curve is constant. The supply of the market quantity is simply the addition of the quantities supplied in the market by all firms.