Holding all else constant, as prices increase the corresponding quantity supplied increases, and as prices decrease the quantity supplied decreases ___________________?
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Answer: C. Law of supply
Explanation
The law of supply states that price and quantity supplied are directly related, holding other factors constant. When prices rise, producers increase output to capture higher profits. When prices fall, production is scaled back to avoid losses. This relationship forms an upward-sloping supply curve on a standard economic graph. Higher prices incentivize new firms to enter the market and existing firms to expand. Marginal cost increases necessitate higher prices to justify greater production volumes.
Businesses use the law of supply to determine production levels based on market price signals. During commodity price surges, firms ramp up extraction and manufacturing operations. This law governs how markets allocate resources in response to scarcity. Say law states that supply creates its own demand in macroeconomic theory. Keynesian supply theories focus on aggregate output and price rigidity during recessions. Option D is incorrect because option C correctly names the law of supply.
- Subject
- Agriculture
- Category
- Agriculture
- Topic
- —
- Difficulty
- medium
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