Question

In regards to the Law of Supply, Price and Quantity Supplies have A direct relationship (if price goes up quantity supplied goes up too) An indirect relationship (if price goes up quantity supplied goes down) A varying relationship (if price goes up it depends on the specific situation to determine if quantity supplied goes up or down) No relationship because it is price and supply (shouldn't be quantity supplied)

Answer 1

A direct relationship (if price goes up quantity supplied goes up too)

Step-by-step explanation:

The law of supply states that as the price of a good increases so does the quantity the supplier is willing to provide to the consumer. Also as price decreases the quantity the supplier is willing to provide reduces all things being equal.

Increase in price results in an increased profit for the supplier so they are motivated to supply more of the good.

Therefore there is a direct relationship between the price and quantity supplied of a good.

For example if the price of a good is $10 and the supplier incurs cost of $7 in producing it he will make a profit of $3. An increase in price to $20 will increase his profit to $13.

This will motivate him to increase production.