Ceteris paribus, when the price of a good falls, the quantity supplied also falls

Economics Dec 08, 2020

Ceteris paribus, when the price of a good falls, the quantity supplied also falls. This is the law of:

a) increasing costs.

b) demand.

c) supply.

d) increasing opportunity costs.

Expert Solution

The correct option is c) supply.

Whenever price moves, the sellers' response will move by changing its quantity supplied proportioned to the price change. In the sellers' point of view, it will get the maximum profit it can charge to customers hence a price drop will quantity supplied will drop as well as sellers try to decrease the cost of production to maintain the profit level.

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