The law of supply states that, other things equal, when the price of a good rises, the quantity supplied of the good rises. falls, the supply of the good rises. falls, the quantity supplied of the good rises. rises, the supply of the good falls.
The Correct Answer and Explanation is:
The correct answer is: “rises, the quantity supplied of the good rises.”
The law of supply is a fundamental concept in economics. It states that, all else being equal, there is a direct relationship between the price of a good and the quantity of that good that producers are willing to supply. In simpler terms, as the price of a good increases, suppliers are more willing to produce and offer more of that good for sale. Conversely, if the price of the good falls, suppliers are less motivated to supply the good, leading to a decrease in the quantity supplied.
This relationship exists because higher prices act as an incentive for producers to increase production. When producers can sell a good for a higher price, they are more likely to allocate resources, such as labor and materials, to produce more of that good. For example, if the price of a product like wheat increases, farmers may decide to plant more wheat, thereby increasing the quantity of wheat supplied to the market.
On the other hand, if prices decrease, suppliers may reduce their output since the lower price may no longer cover the costs of production or may yield lower profits. In this case, producers may shift their resources to other goods that provide higher returns.
The law of supply assumes that other factors (such as production technology, input costs, and government policies) remain constant. If any of these factors change, they can affect the supply curve, shifting it either to the right (increase in supply) or to the left (decrease in supply), independent of the price changes. However, the fundamental principle remains: a higher price generally leads to a higher quantity supplied, and a lower price leads to a lower quantity supplied.
