Question

If all other factors are equal, what will happen to the supply of a product if the price goes up? A. The supply will increase. B. The supply will decrease. C. The demand will increase. D. The competition will decrease. Please select the best answer from the choices provided A B C D

Answer 1

The basic principle is that if the price of a product goes up, all other factors being equal its demand will go down and vice versa (law of demand). Since in this case the price goes up, the demand will go down. The law of supply states that hen prices rise, supply rises too (in order to make profit). There is no general model predicting whether the market will be more competitive or not. Thus, the best answer from the above is A.