Which statement best describes the law of supply?

• A. All else equal, as the price of a good increases, the quantity supplied increases.
• B. All else equal, as consumer income increases, the quantity supplied increases.
• C. All else equal, as the price of a good increases, demand shifts to the right.
• D. All else equal, as the price of a good increases, the quantity supplied decreases.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the law of supply, which states the relationship between the price of a good and the quantity that producers are willing to supply, holding all other factors constant (ceteris paribus).
2. Step 2: Recall that the law of supply indicates a direct relationship: when the price of a good increases, producers are generally willing to supply more of that good because it becomes more profitable.
3. Step 3: Identify that the correct statement must reflect this positive relationship between price and quantity supplied, meaning quantity supplied increases as price increases.
4. Step 4: Eliminate options that confuse supply with demand or that incorrectly describe the relationship, such as changes in consumer income (which affect demand, not supply) or statements about demand shifting.
5. Step 5: Conclude that the best description of the law of supply is: 'All else equal, as the price of a good increases, the quantity supplied increases.'