Answer to Question #247129 in Economics of Enterprise for Sadam Dine

Question

According to the law’s supply, the higher the price of commodity, the higher will be quantity supplied. Explain why.

Answer 1

Solution:

The law of supply states that as the price of a product or service increases, the quantity of products or services that suppliers offer will increase and vice versa. There is a direct correlation between quantity supplied and price.

This is because suppliers are extremely motivated when the price of a product or service goes up and thus will attempt to maximize their profits by increasing the quantity offered for sale. Firms seek to increase their revenues, when they expect to receive a higher price, they will produce more products and services and supply to the market.