What happens to quantity supplied as price rises?

What happens to quantity supplied as price rises?

• A. It rises.
• B. It falls.
• C. It becomes zero.
• D. It is untouched.

Answer: (A)

Quantity supplied rises when price rises because the law of supply tells us higher prices give producers a stronger incentive to produce and sell more. In the short run, as the price for a good increases, firms expand output up to the point where the extra revenue from selling one more unit covers the additional marginal cost. If other factors stay the same (ceteris paribus), a higher price leads to a larger quantity supplied. So, the correct idea is that it rises. It wouldn’t become zero, stay unchanged, or fall just from a higher price.

Quantity supplied rises when price rises because the law of supply tells us higher prices give producers a stronger incentive to produce and sell more. In the short run, as the price for a good increases, firms expand output up to the point where the extra revenue from selling one more unit covers the additional marginal cost. If other factors stay the same (ceteris paribus), a higher price leads to a larger quantity supplied. So, the correct idea is that it rises. It wouldn’t become zero, stay unchanged, or fall just from a higher price.