According to the Law of Supply, what happens to supply when the price falls?

• A. It remains unchanged
• B. It declines
• C. It increases
• D. It fluctuates

Answer: (B)

The Law of Supply states that there is a direct relationship between the price of a good or service and the quantity of it that suppliers are willing to offer. Specifically, as the price of a good decreases, the amount of that good that suppliers are willing to produce and sell also tends to decrease. This is because lower prices can lead to reduced revenue for producers, making it less attractive for them to supply the same quantity of goods. Consequently, when the price falls, the supply typically declines, as producers may choose to allocate their resources to more profitable opportunities.

Understanding this principle helps clarify the behavior of suppliers in response to price changes, illustrating a fundamental concept in economics regarding supply dynamics.