As the price of a good rises, firms will produce more to make more revenue. New firms will have an incentive to enter the market. The tendency of suppliers to offer more of a good at a higher price is called the law of supply. This law states that the higher the price, the larger the quantity produced. If the price of a good falls, less of a good will be produced. Some firms will produce less, and others might drop out of the market.

     A market supply curve illustrates the quantity supplied by all producers in a market at different prices. For example, a market supply curve could show the quantity of pizza supplied by all the pizzerias in a city. A supply curve always rises from left to right. That is because higher prices lead to higher output.

     Elasticity of supply is a concept that predicts how suppliers react to price changes. Industries that cannot easily alter production have inelastic supply. Orange growers, for example, cannot increase production quickly when prices rise. They need to purchase more land and plant more trees in order to increase output. A service industry like a barbershop has elastic supply. If the price of a haircut rises, barber shops and salons can hire new workers quickly. New barber shops will start, and existing businesses will stay open later.