The difference between a supply schedule and a supply curve is simply the difference between a list of numbers and a graph showing how those numbers relate to each other. Both tell you something about how much of something producers will make, and neither is terribly good beach reading.
Supply Schedule Definition
A supply schedule is a chart or table that tells how many "units" of something producers will make based on the current market price of a unit. "Units" is how economists refer to whatever good or service a business actually produces – lawn mowers, loaves of bread, haircuts, singing telegrams, for example.
A simple supply schedule typically has two columns: price and output. For each possible market price, there's a specific number of units that producers can be expected to make – or, in the case of a service like a haircut, make available by having barbers at the shop, scissors in hand.
Law of Supply
The supply schedule illustrates a fundamental principle of economics: the law of supply. This law says there's a direct relationship between the price of something and the quantity that producers will make available.
As prices rise, producers have more incentive to produce more of them. At low prices, the revenue generated by the product may barely exceed its cost (or even fall short). So the higher the price, the higher the profit delivered by each item.
And as companies produce more units, production efficiencies begin to reduce their "marginal cost" – or the added cost of each additional unit. That, in turn, spurs more production. Of course, supply schedules will also be constrained by demand. If you could sell sandwiches for $1 million apiece, there would be an unlimited supply of sandwiches, but at that price, there would be no demand.
Supply Curve Definition
The supply curve is simply the supply schedule plotted on a graph. The graph has two axes, where the vertical axis is price and the horizontal axis is output. In general, a supply curve slopes upward, from the lower left – low price, low output – to the upper right – high price, high output. Contrast this with the classic demand curve, which slopes downward from the upper left to the lower right, reflecting how consumers buy more of something when the price is low and less when the price is high.
The point where the supply and demand curves for a product intersect represents "equilibrium," the price at which the number of units consumers want to buy equals the number producers want to make. Next time you're in a store and see stacks and stacks of a particular product going unsold, say to yourself knowingly, "Somebody hasn't found price equilibrium yet."
Understanding Price Taking
With both the supply schedule and the supply curve, the number of units producers want to make depends on the market price. It's almost as if the producers themselves don't have the power to set their own prices. Simple supply schedules and curves are predicated on the idea of "perfect competition," meaning that every company making a product faces so much competition from identical products that the market alone sets the price. This is called "price taking."
In the real world – as opposed to the hypothetical world of textbook economics – companies are neither purely "price takers" or "price makers." Producers have ways to differentiate their products, and some face little or no competition. When real companies devise their own supply schedules, they have to take many factors into consideration, not solely the price on the shelf.
