Law of Supply
The principle that producers supply more of a good as its price rises, all else equal.
What is Law of Supply?
The law of supply states that there is a positive relationship between the price of a good and the quantity producers are willing and able to supply, all else being equal. Higher prices make production more profitable, incentivizing existing producers to expand output and attracting new entrants to the market. The law of supply is represented by an upward-sloping supply curve on a price-quantity graph. Exceptions exist in cases of fixed supply (land, vintage wines) and in certain labor markets where higher wages may lead workers to choose more leisure instead of more work. Together with the law of demand, the law of supply forms the foundation of competitive price theory and is used to predict how markets respond to changes in cost, technology, and policy.
Example
When crude oil prices rise from $50 to $80 per barrel, previously unprofitable shale wells become viable. U.S. shale producers increase drilling activity, adding 1–2 million barrels per day to global supply within 12–18 months. When prices fall back toward $50, marginal producers shut in production again. The positive price-supply relationship drives the global oil market's self-correcting cycles.
Source: Investopedia — Law of Supply