The fact that a fall in the price of a good results in a decrease in the quantity of the good supplied illustrates
A) the law of supply.
B) the law of demand.
C) a change in supply.
D) the nature of an inferior good.
E) technological improvement.
The correct answer and explanation is :
The correct answer is A) the law of supply.
Explanation:
The law of supply is an economic principle that states that, all else being equal, the quantity of a good supplied in the market increases when its price rises, and decreases when its price falls. This positive relationship between price and supply reflects the idea that suppliers are willing to offer more of a good at higher prices because it becomes more profitable for them to do so. Conversely, when the price falls, suppliers are less inclined to produce and sell as much of the good because it becomes less profitable.
In this case, a fall in the price of a good leads to a decrease in the quantity supplied, which directly aligns with the law of supply. As the price decreases, the incentive for producers to supply that good diminishes, which results in a lower quantity being offered for sale.
This relationship is important in understanding market behavior and pricing. Suppliers make decisions based on the price level because higher prices typically cover production costs and provide greater profit margins, incentivizing them to increase supply. On the other hand, when prices drop, suppliers may face difficulties covering costs or earning a profit, leading them to reduce the quantity supplied.
It’s also important to differentiate the law of supply from the law of demand, which works in the opposite direction. According to the law of demand, as the price of a good falls, the quantity demanded increases because consumers are more willing and able to purchase more of the good at a lower price.
The other options (C, D, and E) do not align with the scenario described. A “change in supply” refers to a shift in the entire supply curve due to factors like changes in production technology or input costs, while “inferior goods” and “technological improvements” are unrelated to this specific pricing effect.