Which of the following demonstrates the law of supply?
Group of answer choices
- When salaries rose, salt sellers decreased their production of salt.
- When shirts producers expected shirt prices to rise in the near future, they decreased their current supply of shirts.
- When the price of soccer balls rose, soccer balls sellers increase their quantity supplied of soccer balls.
- When car production technology improved, car producers increased their supply of cars.
The correct answer and explanation is:
The correct answer is:
“When the price of soccer balls rose, soccer ball sellers increased their quantity supplied of soccer balls.”
Explanation:
The law of supply states that, ceteris paribus (all else being equal), an increase in the price of a good leads to an increase in the quantity supplied, and a decrease in the price leads to a decrease in quantity supplied. This is because higher prices provide an incentive for producers to produce and sell more of the good to maximize profits.
In the given options, the statement about soccer balls directly follows the law of supply. When the price of soccer balls rises, sellers recognize an opportunity to make higher profits, so they respond by increasing the quantity of soccer balls they produce and sell. This positive relationship between price and quantity supplied is the core of the law of supply and is usually represented as an upward-sloping supply curve on a graph.
The other options do not align with the law of supply:
- If salt sellers reduce production despite rising salaries, it contradicts the law of supply.
- If shirt producers expect future price increases and reduce their current supply, they are engaging in speculation, which does not illustrate the law of supply.
- Technological improvements lowering production costs result in an increase in supply, but this is due to external factors rather than a change in price.
Thus, the correct answer is the one demonstrating that when prices rise, suppliers increase the quantity they supply, which is exactly what happens with the soccer ball sellers.