Question

Which one of the following is not a ceteris paribus assumption of the Law of Supply?

Options

• Indirect taxes and subsidies on the firm's products remain constant

• Technology used by the firm in production remains constant

• Prices of the factors of production paid by the firm remain constant

• Price of the commodity produced by the firm remains constant

Answer 1

Price of the commodity produced by the firm remains constant

Explanation:

The law of supply examines how quantity supplied changes when the commodity’s own price changes. It holds other factors, such as technology, factor prices, and taxes or subsidies, constant, not the commodity’s own price.