Question

2. briefly explain the law of supply. then, describe how production cost and the

Answer 1

The law of supply states that all other factors are equal, as the price of a good or service increases, the number of goods or services that suppliers offer will increase, and vice versa.

• If the production cost is high people will tend to shift toward another seller who is selling the Same good at a much lower price
• When the production cost will increase the other factor will also change and will affect the supply
• The presence of another seller will make a more competition between two sellers to earn more profit which may lead to an increase or decrease in the price of the good

• The number of suppliers
• The state of technology
• Government subsidies
• Weather conditions
• The availability of workers to produce the good

Hence it can be concluded that the Law of supply and demand are invisible hands in the market process which lead to inflation or deflation

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