What is the law of supply and how do we illustrate it? The law of supply states that other things remaining the same, the _ the price of a good, the A. lower, greater is the quantity supplied B. higher, greater is the quantity supplied C. higher, greater is the supply of the good D. higher, smaller is the quantity supplied A supply curve that illustrates the law of supply A. shows that the quantity supplied increases as the price falls B. slopes downward to a minimum and then slopes upward C. shows that the quantity supplied remains the same when the price rises D. is upward sloping
The Correct Answer and Explanation is:
The law of supply states that, other things remaining constant, the higher the price of a good, the greater the quantity of that good supplied by producers. This relationship reflects the incentive that higher prices provide for producers to supply more of a good, as they can earn more revenue by selling at a higher price. In simple terms, when prices increase, producers are more willing and able to produce and offer more goods for sale, because it becomes more profitable to do so.
The correct answer for the first part of your question is:
B. higher, greater is the quantity supplied.
As for the supply curve, it visually represents this relationship between price and quantity supplied. A supply curve that illustrates the law of supply is upward sloping, meaning that as the price increases, the quantity supplied also increases. This positive relationship results in a curve that moves upward from left to right.
The correct answer for the second part of your question is:
D. is upward sloping.
To understand the shape of the supply curve, imagine that a producer is willing to offer a product at a higher price because it covers the costs of production more effectively and generates a greater potential profit. As the price rises, it becomes more worthwhile for the producer to allocate resources toward making more of the good, thereby increasing the quantity supplied. Conversely, if the price falls, the producer may not find it profitable enough to produce the same quantity, and the supply would decrease.
This behavior is typically represented on a graph where the price is on the vertical axis and the quantity supplied is on the horizontal axis. The upward slope of the supply curve shows that as the price increases, the quantity supplied rises in response.
In summary:
- The law of supply states that price and quantity supplied have a direct relationship.
- The supply curve is upward sloping, illustrating this relationship.
