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

• A. As the price of a good rises, the quantity supplied decreases, ceteris paribus.
• B. The quantity supplied is independent of the price of the good as long as input prices do not change.
• C. As the price of a good rises, the quantity supplied increases, ceteris paribus.
• D. A change in the price of a good causes the entire supply curve to shift left or right.

Answer: (C)

Verified step by step guidance

1. Understand that the law of supply describes the relationship between the price of a good and the quantity supplied, holding other factors constant (ceteris paribus).
2. Recognize that according to the law of supply, when the price of a good increases, producers are willing to supply more of that good because higher prices can cover higher production costs and increase potential profits.
3. Express this relationship mathematically as: \(\text{Price} \uparrow \Rightarrow \text{Quantity Supplied} \uparrow\), holding other factors constant.
4. Note that this relationship is represented graphically by an upward-sloping supply curve, where the quantity supplied increases as the price rises.
5. Distinguish between a movement along the supply curve (caused by a change in the good's own price) and a shift of the entire supply curve (caused by changes in other factors like input prices, technology, or regulations).