Why is the supply curve upward-sloping?

The law of supply states that as price increases, so does quantity supplied and vice versa, as seen in the supply schedule below:

Price	Quantity supplied
$1	5
$2	10
$3	15
$4	20
$5	25

Because it reflects this relationship, the supply curve is positively sloped.

To better understand the law of supply, keep in mind that suppliers can make choices about what they produce. For example, a restaurant can produce a wide range of meals. If the price consumers are willing to pay for one type of meal increases relative to the others, it makes sense that restaurants would begin making more of that type of meal. This profit motive is one reason the supply curve is upward sloping.

Alongside this idea is the idea of opportunity cost. Every time a restaurant makes one type of meal (e.g., pasta), they give up the ability to make a different meal (e.g., pizza). When the price of pasta goes up the opportunity cost of making pizza increases, and restaurateurs reallocate their resources to producing more pasta. This is especially true if other firms, seeing high prices in the industry, switch their production to seek these higher prices.

In the example above, restaurants increase production by reallocating their existing resources. But what if restaurants want to produce more meals than they can with their given resources? To do so, the restaurant must buy new machinery or hire more workers, meaning the restaurant will face additional costs. This is a third reason price has a positive relationship with quantity supplied—production may only be able to increase if prices rise enough to cover increased production costs.