In microeconomics, what does the law of supply suggest about the relationship between a good’s price and the quantity supplied, holding other factors constant?

• A. As the price rises, the quantity supplied decreases, ceteris paribus.
• B. As the price rises, the quantity supplied increases, ceteris paribus.
• C. Changes in price do not affect the quantity supplied; only income matters.
• D. As the price rises, the quantity demanded increases, ceteris paribus.

Answer: (B)

Verified step by step guidance

1. Understand that the law of supply describes the relationship between the price of a good and the quantity of that good that producers are willing to supply, holding other factors constant (ceteris paribus).
2. Recall that according to the law of supply, there is a direct relationship between price and quantity supplied, meaning that when the price of a good increases, producers are generally willing to supply more of it.
3. Recognize that this positive relationship occurs because higher prices can cover higher production costs and provide greater potential profits, incentivizing producers to increase output.
4. Note that the law of supply specifically refers to changes in quantity supplied due to price changes, not changes in supply caused by other factors like technology or input prices.
5. Therefore, the correct interpretation is: as the price rises, the quantity supplied increases, ceteris paribus.