Question

The law of supply states that

1. As price increases, quantity supplied will increase
2. As price increases, quantity supplied will decrease
3. As price increases, quantity supply will remain the same
4. There is no law of supply. Supply is only related to demand.

Answer 1

1. As price increases, quantity supplied will increase.

Explanation: the law of supply says, ceteris paribus, producers will offer more of a good at higher prices because higher prices make production more profitable. This is why the supply curve slopes upward. (There are rare exceptions in specific markets or at certain ranges—for example some labor supply situations—but the standard law holds.)