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Chapter 4: Problem 5

What happens to quantity supplied when price is lowered? (L.O3) a) It rises. b) It falls. c) It stays the same. d) It cannot be determined if it rises, falls, or stays the same.

Short Answer

Expert verified
The correct short answer is: (b) It falls.

Step by step solution

01

Understanding the supply

In economics, supply is the amount of a good or service that producers are willing and able to sell at different prices over a specific period. The law of supply states that there is a direct relationship between the price and quantity supplied, holding other factors constant (ceteris paribus). In other words, the quantity supplied will increase when the price rises and decrease when the price falls.
02

Identifying the relationship between price and quantity supplied

The question asks what happens to quantity supplied when the price is lowered. Since the law of supply indicates that the quantity supplied and price have a direct relationship, a lower price would lead to a decrease in the quantity supplied.
03

Choosing the correct answer

Based on our understanding of the relationship between price and quantity supplied, we can determine the correct answer. a) It rises. - This option is incorrect because a lower price does not lead to a rise in quantity supplied. b) It falls. - This option is correct as the quantity supplied falls when the price is lowered. c) It stays the same. - This option is incorrect because the quantity supplied does change when there is a change in price. d) It cannot be determined if it rises, falls, or stays the same. - This option is incorrect because we can determine the relationship between price and quantity supplied using the law of supply. The correct answer is (b) It falls.

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Most popular questions from this chapter

As price rises, \((\mathrm{LOI}, 2)\) a) quantity demanded and quantity supplied both rise b) quantity demanded and quantity supplied both fall c) quantity demanded rises and quantity supplied falls d) quantity demanded falls and quantity supplied rises

An increase in supply while demand remains unchanged will lead to (LO3) a) an incrcase in equilibrium price and a decrease in equilibrium quantity b) a decrease in equilibrium price and a decrease in equilibrium quantity c) an increase in equilibrium price and an increase in equilibrium quantity d) a decrease in equilibrium price and an increase in equilibrium quantity

When market price is above equilibrium price, (LO3) a) market price will risc b) equilibrium price will rise c) market price will fall d) equilibrium price will fall

When quantity supplied is greater than quantity demanded, (LO3) a) price will fall to its equilibrium level b) price will rise to its equilibrium level c) price may rise, fall, or stay the same, depending on a varicty of factors

When supply rises and demund stays the same. (LO3) a) cquilibrium quantity riscs b) equilibrium quantity falls c) equilibrium quantity stays the same
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