Register to reply 
The Law of Supply is wrong?by Kyoma
Tags: supply 
Share this thread: 
#1
Mar612, 08:23 AM

P: 99

Economics:
The Law of supply states that there is a direct relationship between price and quantity supplied, ceteris paribus. That is to say when all other variables are held constant, when price increases, quantity supplied also increases. But from my common knowledge, when quantity supplied increases (there is an increase in supply), prices will go down. This can also be shown on the supply curve graph. Isn't the Law contradicting itself?? I'm a beginner in economics.. have not learned elasticity etc. so, I'm not sure. :( 


#2
Mar612, 06:31 PM

HW Helper
P: 2,279

This is a partial equilibrium assumption.
Basically, if you draw Price, and the quantity, and you draw a straight line with positive slope, then you have your supply function. Thus it is rather easy to see when one increase the other increases. Of course, this is a very trivial economic model. The correct way is to model the simultaneity of Demand function, and Supply function. In actually, research both functions are estimated as Simultaneous equations in an econometric model. 


#3
Mar1512, 02:02 PM

P: 813




Register to reply 
Related Discussions  
Opamp supply voltages wrong way round.  Electrical Engineering  4  
Differentiation quotient rule question, am i wrong or is my book wrong?  Calculus & Beyond Homework  1  
Can a common 9V power supply be used as a 9V supply?  Electrical Engineering  2  
Need help about math is my calculation wrong the answer from the text book is wrong  Calculus & Beyond Homework  2  
Wrong war, wrong place, wrong time, and Bush's Desert Shield Jr.  Current Events  6 