What will be the effect on supply when the price of a product rises?

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BlackTom AI · Accepted Answer

Question restatement: What will be the effect on supply when the price of a product rises?

Option a: 'Quantity supplied will increase (there will be an expansion in supply)' This is correct in the context of the law of supply: when price rises, producers are willing to offer more of the good, resulting in a higher quantity supplied along the existing supply curve (an upward movement called a movement along the supply curve, i.e., an expansion in supply). The term 'expansion in supply' is a common way to describe this change.

Option b: 'Supply will decrease (the supply curve will shift left) Quantity supplied will decrease (there will be a contraction in supply)' This is incorrect for a price rise. A higher price does not cause the entire supply curve to shift left; a shift would reflect a non-price factor (like input costs, technology, taxes). Here, the change is due to price itself, so we expect a movement along the curve, not a shift, and not a decrease in quantity supplied.

Option c: 'Supply will decrease (the supply curve will shift left)' This statement also misattributes the cause. Like option b, a shift left would indicate a decrease in supply due to other factors, not simply a higher price. The price change alone prompts more quantity supplied along the same curve, not a leftward shift.

Option d: 'Supply will increase (the supply curve will shift right)' This describes a shift of the entire supply curve to the right, which would imply an increase in supply due to some non-price factor (like improved technology or lower input costs). It does not reflect what happens when the price of the product itself rises, which is a movement along the curve rather than a shift.

In summary, the most accurate interpretation of a price rise is an increase in quantity supplied along the existing supply curve, not a shift of the curve itself. Each incorrect option either attributes the change to a curve shift (which is triggered by non-price determinants) or reverses the direction of the effect on quantity supplied.

What will be the effect on supply when the price of a product rises?

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