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Chapter 4: Problem 5

What happens to quantity supplied when price is lowered? ( \(\mathrm{OO} 3)\) 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
b) It falls.

Step by step solution

01

Understanding the Law of Supply

The law of supply is an economic principle stating that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services that suppliers are willing and able to provide, will also increase, and vice versa. This means that if the price is decreased, the quantity supplied would also decrease.
02

Analyze the Given Options

Now, let's analyze the available options to identify the correct one. a) It rises: This option contradicts the law of supply, which states that if the price is lowered, the quantity supplied will decrease. b) It falls: This option aligns with the law of supply, where a decrease in price leads to a decrease in quantity supplied. c) It stays the same: This option would not be accurate as supply typically responds to changes in price. d) It cannot be determined if it rises, falls, or stays the same: This option suggests that there is no clear relationship between price and quantity supplied. However, we know that the law of supply does provide a clear relationship between these two variables.
03

Select the Correct Option

Based on the law of supply and our analysis of each given option, we can now confidently select the correct answer: b) It falls.

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Most popular questions from this chapter

Which statement is true? (LO5, 6) a) A price floor is above equilibrium price and causes surpluses. b) A price floor is above equilibrium price and causes shortages. c) A price floor is below equilibrium price and causes surpluses. d) A price floor is below equilibrium price and causes shortages.

When quantity demanded is greater than quantity supplied, _____. a) market price will rise b) market price will fall c) market price will stay the same

A demand schedule is determined by the wishes and abilities of ______. a) sellers b) buyers c) buyers and sellers d) neither sellers nor buyers

Usury laws tend to _____ a) create a shortage of loanable funds b) create a surplus of loanable funds c) make it easier to obtain credit d) have no effect on the amount of loanable funds available

At equilibrium price, quantity demanded is _____. a) greater than quantity supplied b) equal to quantity supplied c) smaller than quantity supplied
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