The Law of Supply in Economics
What does the law of supply state in economics?
A) an increase in the quantity of kayaks supplied. B) a decrease in the quantity of kayaks supplied. C) a decrease in the supply of kayaks. D) an increase in the supply of kayaks. E) an increase in the supply of kayaks and a decrease in the quantity of kayaks supplied.
Answer:
The law of supply indicates that a decrease in the price of a good will lead to a decrease in the quantity of the good supplied, hence option B is the correct answer.
The law of supply is a fundamental concept in economics that outlines the principle that if the price of a good increases, the quantity supplied of the good will also increase, all else being the same. Conversely, if the price of a good decreases, under this law, the quantity of the good that suppliers are willing to produce and sell will also decrease because lower prices may not cover the cost of production to the same extent as higher prices.
Therefore, in reference to the original question, if the price of a kayak decreases, other things being equal, this leads to a decrease in the quantity of kayaks supplied. This is because a lower price may reduce the profit margins for suppliers, making it less enticing for them to supply the same quantity as before when prices were higher.