The Law of Supply

Question

The Law of Supply

Quizplus · Accepted Answer

The Law of Supply states that there is a positive relationship between price and quantity supplied. As the price of a good or service increases, producers will respond by supplying more of that good or service to the market. This is because higher prices provide an incentive for producers to earn more profits, which they can do by increasing their output. Conversely, if the price of a good or service decreases, producers will respond by supplying less of that good or service to the market. This is because lower prices reduce the profit incentive for producers, which can lead to a reduction in their output.