Association of Chartered Certified Accountants (ACCA) Certification Practice Test

How does the supply curve typically slope?

1. Downward from right to left

2. Upward from right to left

3. Upward from left to right

4. Flat and horizontal

The correct answer is: Upward from left to right

The supply curve typically slopes upward from left to right because it illustrates the positive relationship between the price of a good or service and the quantity that producers are willing to supply. As prices increase, suppliers are generally motivated to produce more due to the potential for higher revenues and profits. This reaction aligns with the law of supply, which states that all else being equal, an increase in price results in an increase in quantity supplied. This upward slope captures the idea that at higher prices, it becomes more profitable for businesses to allocate resources towards production, leading to greater quantities being offered in the market. Consequently, the supply curve reflecting this relationship is represented as a line that rises as one moves from the left side of the graph (lower price and quantity) to the right side (higher price and greater quantity).