ECON 2005 Study Guide - Midterm Guide: Price Floor, Economic Equilibrium, Marginal Cost
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25 Mar 2017
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a. State the law of supply.
Quantity supplied rises as price increases, other things are constant. Quantity supplied falls as price decreases, other things are constant. | |
Supply increases as price falls. Supply decreases as price rises. | |
Supply increases as price increases. Supply decreases as price decreases. | |
Quantity supplied rises as price falls, other things constant. Quantity supplied falls as price increases, other things are constant. |
b. Why is price directly related to quantity supplied?
As price rises, consumers substitute other goods whose price has not risen. | |
As price rises, suppliers rearrange their activities to supply more of that good to take advantage of the higher price. | |
As price falls, suppliers rearrange their activities to supply more of that good to take advantage of the lower price. | |
As price rises, suppliers rearrange their activities to supply more of a substitute good to take advantage of the higher price. |