What is conventional supply response

Answer 1

Conventional supply response refers to the relationship between the price of a good or service and the quantity supplied in the market. According to conventional economic theory, an increase in the price of a product will lead to an increase in the quantity supplied, assuming all other factors remain constant. This positive relationship between price and quantity supplied is known as the law of supply.

The conventional supply response is influenced by several factors, including production costs, technology, resources, and available inputs. When the price of a product rises, producers have a greater incentive to supply more of that product because they can earn higher profits. This often involves increasing production, expanding facilities, acquiring more resources, or improving efficiency.

Conversely, a decrease in the price of a product would lead to a decrease in the quantity supplied, as producers may reduce production levels or shift resources to more profitable alternatives. In this way, the conventional supply response reflects the basic concept of supply and demand, where changes in price incentivize producers to adjust their levels of production to meet market demand.