Which statement best explains the law of supply? A. The quantity supplied by producers increases as prices rise and decreases as prices fall.
B. The quantity supplied by producers decreases as prices rise and increases as prices fall.
C. The quantity supplied by consumers increases as prices rise and decreases as prices fall.
D. The quantity supplied by consumers decreases as prices rise and increases as prices fall.
The correct answer is:
A. The quantity supplied by producers increases as prices rise and decreases as prices fall.
Explanation: The law of supply states that, ceteris paribus (assuming all other factors are constant), an increase in the price of a good or service will lead to an increase in the quantity supplied by producers. Conversely, if the price decreases, the quantity supplied will also decrease. This relationship reflects producers’ willingness to supply more at higher prices, as they can cover costs and earn more profit. If you need further assistance with this topic, feel free to check the extended services page!