Question

Which of the following statements relating to supply is true?


An increase in an input price will lead to an increase in supply.


a

An increase in the price of a good will lead to an increase in the supply of the good.


b

A decrease in consumers’ income will lead to a decrease in the supply of the good.


c

A decrease in the price of a good will lead to a decrease in the quantity supplied of the good.


d

A decrease in the price of a substitute good in production will lead to a decrease in the supply of another substitute good.

Answer 1

The true statement is: "A decrease in the price of a good will lead to a decrease in the quantity supplied of the good." (choice d)

Brief reasons:
- Higher input prices reduce supply (not increase it).
- A change in the good’s own price changes quantity supplied (movement along the supply curve), not supply (the supply curve shifts only with non-price factors).
- Consumers’ income affects demand, not supply.
- If the price of a substitute in production falls, producers shift away from that product toward the relatively more profitable one, increasing (not decreasing) supply of the other.