The Supply Curve in the Short Run
Overview
The supply curve describes the amount of goods and services are produced in an economy as a function of the demand.
In the short run, the curve describes how suppliers respond to changes in demand that occur within a relatively short
time frame.
The curve is thought to be upward sloping. This is thought to occur for a couple of reasons.
- Companies tend to use their most productive assets first. That is, as they produce more, they use less productive assets to
produce the additional goods. This is particularly true in that some assets are fixed and cannot be increased easily in the
short term. These facts mean that increased production must lead to increased price.
- The effects of scale are usually not present in the short term.
Long Run vs Short Run
