Question

Examine the concept of the law of supply.

Answer 1

• Other things being equal, the quantity of a good supplied increases when its price increases and decreases when the price falls.
• This means there is a direct relationship between the price of a good and the quantity supplied. As the price rises, producers are more willing to offer more goods for sale to earn higher profits. Conversely, when the price falls, they are less inclined to supply.
• Graphically, this relationship is shown with an upward-sloping supply curve, indicating that higher prices lead to greater quantities supplied.