Topic: Movement Along a Supply Curve. If the price of a good falls (with all other determinants of supply held constant), what happens to the quantity supplied?

• A. Supply increases, meaning the entire supply curve shifts rightward.
• B. The quantity supplied increases, representing a movement up the supply curve to a higher quantity.
• C. Supply decreases, meaning the entire supply curve shifts leftward.
• D. The quantity supplied decreases, representing a movement up the supply curve from a higher quantity to a lower quantity.

Answer: (D)

Verified step by step guidance

1. Understand the difference between a movement along the supply curve and a shift of the supply curve. A movement along the supply curve occurs when the price of the good changes, holding other factors constant, while a shift happens when other determinants of supply change.
2. Recall the law of supply: as the price of a good increases, the quantity supplied increases, and as the price decreases, the quantity supplied decreases, assuming all else equal.
3. Since the problem states that the price of the good falls and all other determinants of supply are held constant, this causes a movement along the supply curve, not a shift of the entire curve.
4. Identify the direction of the movement: a fall in price leads to a decrease in quantity supplied, which means moving down along the supply curve from a higher quantity to a lower quantity.
5. Conclude that the correct description is a decrease in quantity supplied represented by a movement down the supply curve, not a shift of the supply curve itself.