What is the industry cost curve?

The industry cost curve—a standard microeconomic graph that maps a product’s available capacity incrementally in order of increasing cost—is fundamental for analyzing the dynamics of pricing. Under many conditions, the level of demand for a product and the cost of the next available supplier’s capacity determine the market price.

How does the industry cost curve affect market prices?

Under many conditions, the level of demand for a product and the cost of the next available supplier’s capacity determine the market price. In theory, the industry cost curve allows companies to predict the impact that capacity, shifts in demand, and input costs have on market prices.

What is the difference between a demand curve and a price curve?

In a typical representation, the price appears on the left vertical axis while the quantity demanded is on the horizontal axis. A demand curve doesn't look the same for every product or service. When the price rises, demand generally falls for almost any good, but the drop is much greater for some goods than for others.