Which of the following is true, in relation to the market supply of gidgets?

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BlackTom AI · Accepted Answer

The question asks: 'Which of the following is true, in relation to the market supply of gidgets?'

Note: The provided data shows an answer labeled as 'c. Supply will expand as price rises.' but the answer_options field is empty, so there are no actual option texts to evaluate individually. Because we cannot see the listed alternatives, we cannot compare each one against the others. Nevertheless, we can discuss the general principle that the labeled correct statement seems to reflect.

Concept clarification:
- In basic supply theory, the law of supply states that, all else equal, an increase in price leads to an increase in the quantity supplied. This results in a movement along the supply curve rather than a shift of the entire curve. Producers respond to higher prices by increasing output because higher prices improve marginal revenue relative to marginal cost.
- The idea that 'supply will expand as price rises' is consistent with the law of supply if we interpret 'expand' as 'increase in quantity supplied' along the existing supply curve. If one were to discuss a broad market response, 'supply' could also be thought of as the entire curve shifting if non-price factors change (like production tech, input costs, or expectations).

Why this statement is considered true in standard contexts:
- Price acts as an incentive for producers to allocate more resources to the production of gidgets, thereby increasing the quantity supplied.
- The relationship is typically depicted as a positively sloped supply curve in the price-quantity plane.

Why some alternative statements could be false (conceptual guidance, since actual options aren’t shown):
- A statement claiming 'supply is constant regardless of price' would contradict the law of supply and be false in normal circumstances; producers generally respond to higher prices by selling more.
- A statement asserting 'supply decreases as price rises' would invert the law of supply and misstate typical market behavior.
- A claim that 'only demand determines price' ignores the supply side entirely and misrepresents market clearing where price results from the interaction of supply and demand.

In sum, the asserted true statement aligns with the core idea that, ceteris paribus, higher prices motivate higher quantities supplied, producing an outward response along the supply schedule.

MUF0061 Economics Unit 1 - Semester 1, 2025 Supply Curves Activity

Which of the following is true, in relation to the market supply of gidgets?

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