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

• A. Quantity supplied increases (a movement down along the existing supply curve).
• B. Supply shifts left, decreasing quantity supplied at every price.
• C. Supply shifts right, increasing quantity supplied at every price.
• D. Quantity supplied decreases (a movement up along the existing supply curve).

Answer: (D)

Verified step by step guidance

1. Recall the law of supply, which states that, ceteris paribus (all other factors held constant), the quantity supplied of a good increases as its price increases, and decreases as its price decreases.
2. Understand that a change in the market price of the good causes a movement along the existing supply curve, not a shift of the supply curve itself.
3. When the market price falls, suppliers are less willing or able to supply the same quantity as before, so the quantity supplied decreases.
4. This decrease in quantity supplied is represented as a movement down along the existing supply curve, reflecting the lower price and lower quantity supplied.
5. Distinguish this from a supply curve shift, which occurs only when other determinants of supply (like technology, input prices, or number of sellers) change, not the price of the good itself.