The law of supply states that Group of answer choices an increase in price of the product leads to an increase in quantity supplied an increase in price of the product leads to a decrease in quantity supplied an increase in price of the product leads to an increase in quantity supplied, other things equal an increase in price of the product leads to a decrease in quantity supplied, other things equal
The Correct Answer and Explanation is:
The correct answer is:
An increase in the price of the product leads to an increase in quantity supplied, other things equal.
Explanation:
The law of supply describes the relationship between the price of a good or service and the quantity of that good or service that producers are willing to supply to the market. According to this law, all other factors being constant (which is what “other things equal” refers to), as the price of a good increases, producers are more willing and able to produce and sell more of that good. This is because higher prices generally mean higher potential profits for producers, incentivizing them to increase their supply.
For example, consider a company that manufactures smartphones. If the price of smartphones increases, the company has a greater incentive to increase production to take advantage of the higher prices and the resulting higher revenue. Conversely, if the price decreases, the company may not find it as profitable to produce the same quantity of smartphones, so it may reduce its supply.
This positive relationship between price and quantity supplied can be visualized on a graph. The supply curve typically slopes upward from left to right, reflecting that as the price rises, the quantity supplied increases.
It’s important to note that this law assumes all other factors affecting supply, such as technology, input costs, and the number of producers in the market, remain unchanged. If any of these factors change, the supply curve could shift, which is a different concept from the law of supply itself.
In summary, the law of supply tells us that an increase in price will lead to an increase in the quantity supplied, assuming all other factors remain constant.
