Question

Select all the correct answers.

Which statements are true according to the law of supply?
A decrease in demand leads to an increase in supply.
A decrease in demand leads to a decrease in supply.
An increase in price leads to a decrease in supply.
A decrease in price leads to a decrease in supply.
An increase in price leads to an increase in supply.

Answer 1

For Edmentum/Plato users, the correct answers are bolded below:

A decrease in demand leads to an increase in supply.

A decrease in demand leads to a decrease in supply.

An increase in price leads to a decrease in supply.

A decrease in price leads to a decrease in supply.

An increase in price leads to an increase in supply.

Answer 2

A decrease in demand leads to a decrease in supply.

A decrease in price leads to a decrease in supply.

An increase in price leads to an increase in supply.

Step-by-step explanation:

Supply refers to the volume of a product that sellers are willing to sell in the market at a given price. As per the law of supply, a higher price motivates sellers to avail more products in the markets. Sellers or suppliers are businesses and are motivated by higher profits. When prices are high, the profit margin will be high, which is an incentive for increased supply. Lower prices have lower margins, which is a risk to a business. Low prices result in reduced prices.

Supply is influenced by demand. If supply does not match demand, there will be either a shortage or excess supply in the market. When demand is low, sellers will reduce supply to avoid losses associated with excess supply .