ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Key points. The law of supply states that a higher price leads to a higher quantity supplied and that a lower price leads to a lower quantity supplied.

Detailed explanation-2: -Supply will increase until a market-clearing price is reached again. If prices fall, suppliers who are unable to cover their costs will drop out. Economists generally lump together the quantities suppliers are willing to produce at each price into an equation called the supply curve.

Detailed explanation-3: -If there is a decrease in supply of goods and services while demand remains the same, prices tend to rise to a higher equilibrium price and a lower quantity of goods and services.

Detailed explanation-4: -If the price decreases, quantity demanded increases. This is the Law of Demand. On a graph, an inverse relationship is represented by a downward sloping line from left to right.

Detailed explanation-5: -Higher production costs make supplying a product less profitable, resulting in firms being less willing to supply the good. Substantial increases in production costs may cause some producers to shut down entirely, according to economist Edwin Mansfield.