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Vladimir79 [104]
2 years ago
4

The graph shows the price of a good compared to the quantity supplied. A graph titled Supply of Cars has Quantity Supplied on th

e x-axis, from 0 to 10, and Price in thousands of dollars on the y-axis, from 0 to 30. Point (S 1, P 1) is at (3, 20) and points (S 2, P 2) is at (8, 25). This graph demonstrates how
Social Studies
1 answer:
garri49 [273]2 years ago
6 0

Answer:

This graph demonstrates how price influences the quantity supplied.

Explanation:

At point (S1, P1), the supplied quantity was 3 units when the price was $20 per unit.   At point (S2, P2) when the price increased to $25 per unit (25% increase), the quantity supplied increased to 8 units (more than 106% increase).  What is operational here is the law of supply.

The law of supply in Economics says that the higher the price, the higher the quantity supplied.  Price has a positive relationship with supply unlike it has with demand.  Suppliers are always willing to supply more of a good or service when the price per unit is high.  This is not the situation when the price is low.  It is important to point out that this law of supply is an assumption that all other factors, for example, production capacity, capital resources, labor, etc.) affecting supply is constant, and that price is the only variable affecting supply.  The price elasticity of supply is more than 1, meaning that supply is highly elastic with respect to price.

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