Reference no: EM131204085
a. State the law of supply.
Quantity supplied rises as price increases, other things constant. Quantity supplied falls as price decreases, other things constant.
Supply increases as price falls. Supply decreases as price rises.
Supply increases as price increases. Supply decreases as price decreases.
Quantity supplied rises as price falls, other things constant. Quantity supplied falls as price increases, other things constant.
b. Why is price directly related to quantity supplied?
As price rises, consumers substitute other goods whose price has not risen.
As price rises, suppliers rearrange their activities to supply more of that good in order to take advantage of the higher price.
As price falls, suppliers rearrange their activities to supply more of that good in order to take advantage of the lower price.
As price rises, suppliers rearrange their activities to supply more of a substitute good in order to take advantage of the higher price.
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