ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price and quantity are inversely related
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Consumers prefer lower prices to higher ones
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Production costs rise as more output is produced
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Firms make less profit at higher prices
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Detailed explanation-1: -The supply curve slopes upward because as a product’s price rises, the business would tend to be more willing to make it. Also, since businesses are efficient and would exhaust the cheapest production inputs first, the cost of production tends to rise as output increases.
Detailed explanation-2: -In most cases, the supply curve is drawn as a slope rising upward from left to right, since product price and quantity supplied are directly related (i.e., as the price of a commodity increases in the market, the amount supplied increases).
Detailed explanation-3: -As a result, a higher cost of production typically causes a firm to supply a smaller quantity at any given price. In this case, the supply curve shifts to the left.
Detailed explanation-4: -Two reasons why the curve is upward sloping: Increasing Opportunity Cost: The higher the price, more firms are willing to produce and sell because any higher opportunity costs can be covered by the higher price. Thus, more products are supplied.