Question

If the selling price of a product rises and as a result businesses increase their production, then:

A. quantity supplied has decreased

B. supply has increased

C. quantity supplied has increased

D. both supply and quantity supplied has increased

E. supply has decreased

F. both supply and quantity supplied has decreased.

Answer 1

When a firm increases its production due to change in factors other than its own price then we say that supply has increased and this result in shift is supply curve to the right.

When a firm increases its production due to increased in its own price then we say that quantity supplied has increased and which results in upward movement along supply curve.

Here firm has increased its production due to increase in its own selling price and so this will result in increase in quantity supply.

Hence, the correct answer is (C) quantity supplied has increased.