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According to the theory of supply, sellers will place: a) a fixed amount of the good on the market regardless of its price

Economics Dec 13, 2020

According to the theory of supply, sellers will place:

a) a fixed amount of the good on the market regardless of its price.

b) more of the product on the market when its price increases.

c) less of the product on the market when its price increases.

d) more of the product on the market when its price decreases.

e) None of the above.

Expert Solution

According to the theory of supply, sellers will place b) more of the product on the market when its price increases.

The law of supply posits that other influences remaining unchanged, the quantity supplied of a good or service increases when the price of the good or service rises. From this law, it is clear that the quantity demanded of a good and the price of the good have a positive correlation. Usually, when the price of a product surges, the producers experience an increase in profits. As a result, they will increase the quantity supplied when the product's price rises. Similarly, when the price falls, the suppliers will reduce the amount of goods they deliver to the market.

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