How is the supply curve for an individual product different from the aggregate supply curve?
Unlike the aggregate supply curve, the supply curve for an individual product: • indicates the responses of firms to change in RELATIVE prices • slopes the way it does because of SWITCHING among products • almost certainly slopes upward to the right • is drawn on the assumption that the public’s income is constant • all of the above Answer: E. The individual product supply curve measures the response of firms to a change in the price of that particular good. Firms respond because it represents a change in the price of that good relative to the prices of all other goods (answer A). As the price of that good increases relative to the price of all other goods, firms switch to producing that good (Answer B). This behavior implies the individual product supply curve slopes upward to the right (answer C), given the ceteris paribus assumptions that include unchanged income (answer D). The aggregate supply curve shares no common foundations with the individual product supply curve. The aggrega
