The law of supply declares which of the following?

• A. As the price of a good decreases, the quantity supplied increases, ceteris paribus.
• B. As the price of a good increases, the quantity demanded increases, ceteris paribus.
• C. As the price of a good increases, the quantity supplied increases, ceteris paribus.
• D. As the price of a good increases, the supply curve shifts to the left.

Answer: (C)

Verified step by step guidance

1. Understand the law of supply: It states that, ceteris paribus (all else equal), there is a direct relationship between the price of a good and the quantity supplied.
2. Identify the key terms: 'Quantity supplied' refers to the amount of a good producers are willing and able to sell at a given price, while 'supply' refers to the entire relationship between price and quantity supplied.
3. Recognize that the law of supply implies that when the price of a good increases, producers are willing to supply more of it, leading to an increase in quantity supplied along the supply curve.
4. Note that a change in price causes a movement along the supply curve (change in quantity supplied), not a shift of the supply curve itself. A shift in the supply curve occurs due to other factors like technology or input prices.
5. Therefore, the correct statement is: 'As the price of a good increases, the quantity supplied increases, ceteris paribus.' This reflects the positive relationship described by the law of supply.