Supply Curve Diagram. Here p 0 is the original equilibrium price and q 0 is the equilibrium quantity. Humphrey undoubtedly the simplest.
And most frequently used tool of microeconomic analysis is the conven tional partial equilibrium demand and supply curve diagram of the textbooks. The effect of a specific per unit subsidy is to shift the supply curve vertically downwards by the amount of the subsidy. Higher prices provide a profit incentive for firms to expand production.
Higher prices provide a profit incentive for firms to expand production.
Typically the supply curve comprises x and y axis where the former represents the price and the latter shows the quantity of the product that has been supplied. Atc curve includes the average variable cost and average fixed cost of a firm. It is very important to note that the supply curve falls from right to left and it indicates that at high prices there is high supply and at low prices there is low supply. We may now consider a change in the conditions of demand such as a rise in the income of buyers.