Question

Which of the following best describes the law of supply?

A. Sellers set the price that demanders pay.
B. Producers sell the same amount of a good no matter its price.
C. Supply is infinite.
D. Legal authorities regulate markets.
E. As price increases, quantity supplied increases.

Answer 1

The law of supply states that as price increases, quantity supplied also increases, while all other variables remain constant.

Step-by-step explanation:

The law of supply is the common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, while all other variables are held constant.

For example, let's say the price of a product increases. As a result, producers are motivated to supply more of that product to take advantage of the higher price and maximize their profits. This increase in price leads to an increase in quantity supplied.

Conversely, if the price of a product decreases, producers have less incentive to supply it, resulting in a decrease in the quantity supplied.