Author Question: Explain why there is a direct relationship between price and quantity supplied. What will be an ... (Read 93 times)

Redwolflake15 · **on:** Jun 29, 2018

Explain why there is a direct relationship between price and quantity supplied.

What will be an ideal response?

Question 2

A production possibilities curve will shift inward

A) when the unemployment rate increases.
B) when production is inefficient.
C) when resources are expanding.
D) when a war destroys the capital goods of a country.

lgoldst9 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

For firms to produce more of a good per time period they have to purchase more materials, hire more labor, and purchase other inputs used to make the good. To get the producer to pay these higher costs it is necessary to increase the price the seller receives for each unit sold. Firms will also increase quantity supplied if the price of that good increases, allowing the firm to gain additional profits. The profits are incentives for the supplier to produce more.

Answer to Question 2

D