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According to the law of supply, which of the following represents the relationship between quantity supplied and price? A. move in same direction. B. move in the opposite direction. C. have no impact on each other. D. cannot be shown on the same graph.

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Michael Koren eNotes educator | Certified Educator

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The law of supply states that as the price of a product or service increases, the quantity supplied will also increase. The reverse is true if the price of a product or service drops. Thus, the correct answer to this question is the first choice or answer A. On a graph, the supply line moves upward and to the right when the price is on the vertical axis and the quantity supplied is on the horizontal axis.

In reality, the price of a product or service is determined by the interaction between supply and demand. Thus, if suppliers provide too much of a product or service, they will reach a point where they likely won’t be able to sell everything that they supplied.

When just considering supply, I am more willing to supply my labor when the wage I receive is high. The higher the pay, the more likely I would be willing to work. At some point, if the pay is too low, I wouldn’t be willing to supply my labor. If I could referee a high school basketball game for $150, I would be willing to work several games a day, and I would work five or six days a week. On the other hand, if the pay rate for refereeing a high school basketball game was $30, I probably won’t work at all.

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pohnpei397 eNotes educator | Certified Educator

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The best answer to this is A.  The quantity supplied and the price of a good or service move in the same direction.  On a graph of supply and demand, the vertical axis is the price.  The supply curve is upward sloping.  Therefore, you can see that the quantity supplied goes up with the price of the good or service.

This makes intuitive sense because the more a good costs (the more you can sell it for) the more you will want to provide of it (all things being equal).  If, for example, you can sell 1 hour of your labor for $1 you probably won't want to work much if you have the choice -- it's not worth it.  But if I'll pay you $100 per hour to work, I bet you'll want to work a lot of hours so you can make a lot of money.

There are other technical reasons for the upward slope of a supply curve, but this is the most intuitive one and it generally helps my students remember the relation between price and quantity supplied.

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