what is the law of supply 
the law of supply is a microeconomic law it states that all other factors being equal as the price of a good or service increases the quantity of that good or service that suppliers offer will increase and vice versa in plain terms this law means that as the price of an item goes up suppliers will attempt to maximize their profits by increasing the number of that item that they sell daniel fishel investopediaunderstanding the law of supplythe chart below depicts the law of supply using a supply curve which is upward sloping a b and c are points on the supply curve each point on the curve reflects a direct correlation between quantity supplied q and price p so at point a the quantity supplied will be q1 and the price will be p1 and so on julie bang investopediathe supply curve slopes upward because over time suppliers can choose how much of their goods to produce and later bring to market at any given point in time however the supply that sellers bring to market is fixed and sellers simply face a decision to either sell or withhold their stock from a sale consumer demand sets the price and sellers can only charge what the market will bear if consumer demand rises over time the price will rise and suppliers can choose to devote new resources to production or new suppliers can enter the market which increases the quantity supplied demand ultimately sets the price in a competitive market supplier response to the price they can expect to receive sets the quantity supplied the law of supply is one of the most fundamental concepts in economics it works with the law of demand to explain how market economies allocate resources and determine the prices of goods and services british economist alfred marshall 1842 1924 a specialist in microeconomics contributed significantly to supply theory especially in his pioneering use of the supply curve he emphasized that the price and output of a good are determined by both supply and demand the two curves are like scissor blades that intersect at equilibrium 1examples of the law of supplythe law of supply summarizes the effect that price changes have on producer behavior for example a business will make more video game systems if the price of those systems increases the opposite is true if the price of video game systems decreases the company might supply 1 million systems if the price is 200 each but if the price increases to 300 they might supply 1 5 million systems to further illustrate this concept consider how gas prices work when the price of gasoline rises it encourages profit seeking firms to take actions to expand supply such as the law of supply is so intuitive that you may not even be aware of all the examples around you for example when college students learn that computer engineering jobs pay more than english professor jobs the supply of students with majors in computer engineering increases if consumers start paying more for cupcakes than for doughnuts bakeries will increase their output of cupcakes and reduce their output of doughnuts to increase their profits the law of supply can even impact your own employment when your employer pays time and a half for overtime the number of hours you are willing to supply for work might increase 