The law of supply states that, other things equal ? price and quantity supplied are directly or positively related. ? The lower the price of a product more will be the supply of that product ? consumers will buy more of a product at high prices than at low prices. ? price and quantity demanded are directly related.
The Correct Answer and Explanation is:
The correct statement about the law of supply is that price and quantity supplied are directly related. This means that, other things being equal, as the price of a good or service increases, the quantity supplied by producers also increases, and conversely, as the price decreases, the quantity supplied decreases.
The law of supply is based on the assumption that producers are willing to supply more of a good when they can sell it at a higher price because higher prices generally lead to higher potential profits. Producers are more incentivized to increase production when they anticipate that they will be able to sell goods at higher prices. Therefore, the quantity of goods or services supplied moves in the same direction as the price.
This relationship is often illustrated by an upward-sloping supply curve on a graph where the price is plotted on the vertical axis, and the quantity supplied is plotted on the horizontal axis. The upward slope indicates that as prices rise, suppliers are willing to produce and sell more of the good.
It’s important to note that the law of supply differs from the law of demand. While the law of supply suggests that price and quantity supplied are directly related, the law of demand states that price and quantity demanded are inversely related. As prices rise, consumers tend to buy less of a product because the good becomes less affordable, which is opposite to the relationship seen in supply.
In summary, the law of supply shows that as the price of a product rises, producers are more willing to supply more of it. This positive relationship reflects the way suppliers respond to market conditions to maximize profit.
