According to the law of supply, the relationship between the price of a commodity and its quantity supplied is _______.

Correct option is C

The correct answer is (c) Positive.

According to the law of supply, there is a direct (positive) relationship between the price of a commodity and its quantity supplied.

• As the price of the commodity increases, the quantity supplied also tends to increase, and vice versa.
• Producers are generally willing to supply more of a good at a higher price.

Positive Relationship:

• The law of supply states that when the price of a good rises, producers are incentivized to produce and supply more of that good.

Additional Information:

Law of Supply:

• States that ceteris paribus (all other things being equal), an increase in the price of a commodity leads to an increase in the quantity supplied, and a decrease in price leads to a decrease in quantity supplied.
• This is because higher prices provide producers with an incentive to produce more due to the expectation of greater profitability.

Factors Influencing Supply (Apart from Price):

• Production Costs: If production costs decrease, supply increases even if prices remain constant.
• Technological Advancements: New technologies can reduce costs, increasing supply.
• Government Policies: Subsidies, taxes, and regulations can affect the quantity supplied.
• Expectations of Future Prices: If producers expect prices to rise in the future, they may reduce current supply, anticipating higher profits later.

Example:

• If the price of smartphones increases, manufacturers are likely to produce and supply more smartphones because they anticipate higher revenues.
• Conversely, if prices fall, supply decreases since the cost-benefit of production becomes less favorable.

Elasticity of Supply:

• The extent to which supply reacts to price changes is measured by the elasticity of supply.
• A supply is elastic if a small change in price leads to a significant change in quantity supplied.
• A supply is inelastic if the change in quantity supplied is small despite price changes.