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Question
State with reason whether you agree or disagree with the following statement:
There is a direct relationship between price and quantity supplied.
Solution
I agree with the given statement.
Reason:
- The law of Supply states that "Other things being constant, higher the price of a commodity, more is the quantity supplied and lower the price of a commodity, less is the quantity supplied.”
- In simple words, higher the price, higher the supply and lower the price, lower the supply.
- The supply curve graphically represents this relationship between price and supply. It has a positive slope i.e. it slopes upward from left to right.
Therefore, there is a direct relationship between price and quantity supplied.
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