Question

g The law of supply states that, other things equal, an increase in a. price causes quantity supplied to increase. b. price causes quantity supplied to decrease. c. quantity supplied causes price to increase. d. quantity supplied causes price to decrease.

Answer 1

The law of supply indicates that an increase in price results in an increase in the quantity supplied, as producers are motivated by higher potential profits. Hence, the answer to the student's question is a. price causes the quantity supplied to increase.

Step-by-step explanation:

The law of supply states a fundamental principle of economic theory: that a higher price for a good or service leads to an increase in the quantity supplied of that good or service, assuming that all other variables remain constant. This notion reflects the producer's willingness to supply more as the potential for higher revenue increases. When presented with the options, the correct answer to the question is a. price causes quantity supplied to increase.

In economic terms, this relationship between price and quantity supplied is seen with virtually all goods and services and is graphically represented by the supply curve, which typically slopes upwards. Producers are motivated by the prospect of higher profits, and as prices rise, they have more incentive to produce additional quantities to capitalize on the higher prices. Conversely, if the price were to decrease, the quantity supplied would typically decrease as well since the incentive for production is lower.

Answer 2

a. price causes quantity supplied to increase.

Step-by-step explanation:

The law of supply states that, other things equal, an increase in price causes quantity supplied to increase. An increase in price causes the supply curve to slope upward, thus, giving producers of goods and service providers, an incentive to supply more quantity of their products and vice-versa.

Also, the demand for goods and services has an effect on the quantity of goods and services provided by the producers or suppliers. Hence, an increase in the demand for a product would result in an increase in price, thereby causing the producers to supply more quantity in order to maximize profits.

For instance, an electronic gadget company will manufacture more television sets if the price of those television increases.