that portion of the long-run marginal cost curve above the minimum of the long run average cost curve. Shape of the short-run supply curve The Law of Diminishing Marginal Returns (LDMR) shapes the SRMC curve. The LDMR states that as production increases eventually a point (the point of diminishing marginal returns) will be reached after which additional units of output resulting from fixed increments of the labor input will be successively smaller. That is, beyond the point of diminishing marginal returns the marginal product of labor will continually decrease and hence a continually higher selling price would be necessary to induce the firm to produce more and more output. From firm to market supply curve The market supply curve is the horizontal summation of firm supply curves. The market supply curve can be translated into an equation. For a factor j for example the market supply function is where and for all p > 0 and r > 0. Note: not all assumptions that can be made for individual supply functions translate over to market supply functions directly. The shape of the market supply curve The law of supply dictates that all other things remaining equal, an increase in the price of the good in question results in an increase in quantity supplied. In other words, the supply curve slopes upwards. However, there are exceptions to the law of supply. Not all supply curves slope upwards. Some heterodox economists, such as Steve Keen and Dirk Ehnts, dispute this theory of the supply curve, arguing that the supply curve for mass produced goods is often downward-sloping: as production increases, unit prices go down, and conversely, if demand is very low, unit prices go up. This corresponds to economies of scale. Elasticity The price elasticity of supply (PES) measures the responsiveness of quantity supplied to changes in price, as the percentage change in quantity supplied induced by a one percent change in price. It is calculated for discrete changes as and for smooth changes of differentiable supply functions as . Since supply is usually increasing in price, the price elasticity of supply is usually positive. For example, if the PES for a good is 0.67 a 1% rise in price will induce a two-thirds increase in quantity supplied. Significant determinants include: Complexity of production: Much depends on the complexity of the production process. Textile production is relatively simple. The labor is largely