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The law of supply states that, other things remaining constant, as the price of a good rises, the quantity supplied of it will:
Afall, giving an inverse relationship between the two
Bstay fixed regardless of the change in its price
Crise, giving a direct relationship between the two
Dfirst fall sharply and then rise back to the start
Answer & Solution
Correct answer: C. rise, giving a direct relationship between the two
1. The law of supply links price and quantity supplied, holding all else constant.
2. A higher price means greater profit, so a greater incentive to produce and offer for sale.
3. Thus quantity supplied rises as price rises.
4. This is a direct relationship between price and quantity.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.2_
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