What Is a Supply Curve?

• A supply curve represents the quantity of a good that will be produced at a given price. The higher the price, the larger the quantity of the good that will be available to purchase. This is contrasted to the demand curve on which a higher price causes fewer of the goods to be desired.
  
  

Role of the Cost of Production on the Supply Curve

• As production increases, the marginal costs of producing more goods increases. This is because the most efficient means of producing a good will be used even when prices are low. As prices rise, it is profitable to use means that are not as efficient.
  
  

Exceptions to the Rule That a Supply Curve Slopes Upward

• While the general rule is to expect an upward slope on a supply curve, there are a few exceptions. First, there are goods for which the cost of production drops with the addition of more quantities. Computer software is a common example---the programming work is upfront and the cost of making more copies is tiny. Similarly, there can be stickiness in short-run supply curves such that the upward slope does not occur. For example, a contract may fix the price on some goods even when the quantity supplied has increased.