Suppliers adjust their volume based on price
The law of supply is a basic principle in economics that asserts that, assuming all else being constant, an increase in the price of goods will result in a corresponding direct increase in the supply thereof. The law works similarly with a decrease in prices.
The law of supply depicts the producer’s behavior when the price of a good rises or falls. With a rise in price, the tendency is to increase supply because there is now more profit to be earned. On the other hand, when prices fall, producers tend to decrease production due to the reduced economic opportunity for profit.
Where:
The overarching relationship is between price and quantity, and applies only if all other factors remain constant. There are other factors that can affect the quantity supplied of a given. The following are some of the more common factors:
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