<p>I am not an expert in micro theory. This answer is based on my limited knowledge.</p>
<p>Usually you don't. If the supply curve is drawn by stacking all the units of supply according to their marginal cost, as what happened in your figure, then the supply curve is monotonic by definition.</p>
<p>However, while the same goes to demand curve, I have actually seen non-monotonic demand curve in <a href="https://www.jstor.org/stable/pdf/2937660.pdf" rel="nofollow noreferrer">Becker 1991</a>. In that paper, Becker shows that you can have non-monotonic demand curve if there is social influence so that a consumer's demand depends on demands by other consumers.</p>
<p>In analogy, I conjecture that if there is some externality of production so that a firm's marginal cost depends on other counterparts to some degree, there might be non-monotonic supply curve. But I don't know such a paper. I expect some other experts could give a real example from the literature.</p>

CC BY-SA 4.0
2021-03-16T20:28:12.600Z
2021-03-16T20:28:12.600Z
Alalalalaki
<p>In the context of labour supply. The <a href="https://en.wikipedia.org/wiki/Backward_bending_supply_curve_of_labour" rel="nofollow noreferrer">Wikipedia page</a> on it offers the following explanation:</p>
<blockquote>
<p>As wages increase above the subsistence level [...], there
are two considerations affecting a worker's choice of how many hours
to work per unit of time [...]. The first is
the substitution or incentive effect. With wages rising, the tradeoff
between working an additional hour for pay and taking one extra hour
of unpaid time changes in favor of working. Thus, more hours of
labour-time will be offered at the higher wage than the lower one. The
second and countervailing effect is that the hours worked at the old
wage rate now all gain more income than before, creating an income
effect, which encourages more leisure to be chosen because it is more
affordable [...], eventually neutralising
the substitution effect and causing the backward bend.</p>
</blockquote>

CC BY-SA 4.0
2021-03-17T18:05:07.310Z
@VARulle thanks for you answer. Would it be correct also to consider production in industries, for example, production marginal cost decreases with volume (i.e. volume discount), until a new production line must be turned on if the first on is saturated?
DeepNet
CC BY-SA 4.0
2021-03-18T09:05:27.367Z
@1muflon1, yes, did so now.
VARulle
CC BY-SA 4.0
2021-03-18T09:24:34.893Z
@DeepNet, in a decreasing cost industry the long-run supply curve will be downward sloped, if this is what you mean.
VARulle
CC BY-SA 4.0
2021-03-16T22:10:29.717Z
2021-03-18T09:04:29.707Z
2021-03-18T09:04:29.707Z
VARulle
<p>Supply curves are usually non decreasing. For example in a electricity market, providing more capacity means turning on new production units with higher costs, see e.g. the following representation:</p>
<p><a href="https://i.sstatic.net/0mmhM.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/0mmhM.png" alt="Supply Stack in Electricity Markets enter image description here" /></a></p>
<p>My question is, in what context would it make sense to have a non monotonic supply curve?</p>

<supply-and-demand><markets>
Non monotonic supply curve
DeepNet
# Non monotonic supply curve

(Asked by: username_0 on 2021-03-16)

Supply curves are usually non decreasing. For example in a electricity market, providing more capacity means turning on new production units with higher costs, see e.g. the following representation:

[![Supply Stack in Electricity Markets enter image description here](https://i.sstatic.net/0mmhM.png)](https://i.sstatic.net/0mmhM.png)

My question is, in what context would it make sense to have a non monotonic supply curve?

**Tags:** supply-and-demand, markets

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## 2 answers

### Answer by username_1 on 2021-03-16. Score: 3

I am not an expert in micro theory. This answer is based on my limited knowledge.

Usually you don't. If the supply curve is drawn by stacking all the units of supply according to their marginal cost, as what happened in your figure, then the supply curve is monotonic by definition.

However, while the same goes to demand curve, I have actually seen non-monotonic demand curve in [Becker 1991](https://www.jstor.org/stable/pdf/2937660.pdf). In that paper, Becker shows that you can have non-monotonic demand curve if there is social influence so that a consumer's demand depends on demands by other consumers.

In analogy, I conjecture that if there is some externality of production so that a firm's marginal cost depends on other counterparts to some degree, there might be non-monotonic supply curve. But I don't know such a paper. I expect some other experts could give a real example from the literature.


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### Answer by username_2 on 2021-03-16. Score: 3

In the context of labour supply. The [Wikipedia page](https://en.wikipedia.org/wiki/Backward_bending_supply_curve_of_labour) on it offers the following explanation:

> As wages increase above the subsistence level [...], there
> are two considerations affecting a worker's choice of how many hours
> to work per unit of time [...]. The first is
> the substitution or incentive effect. With wages rising, the tradeoff
> between working an additional hour for pay and taking one extra hour
> of unpaid time changes in favor of working. Thus, more hours of
> labour-time will be offered at the higher wage than the lower one. The
> second and countervailing effect is that the hours worked at the old
> wage rate now all gain more income than before, creating an income
> effect, which encourages more leisure to be chosen because it is more
> affordable [...], eventually neutralising
> the substitution effect and causing the backward bend.

> **Comments:**
> **username_0**: @VARulle thanks for you answer. Would it be correct also to consider production in industries, for example, production marginal cost decreases with volume (i.e. volume discount), until a new production line must be turned on if the first on is saturated?  
> **username_2**: @1muflon1, yes, did so now.  
> **username_2**: @DeepNet, in a decreasing cost industry the long-run supply curve will be downward sloped, if this is what you mean.  

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