which of the following is true about the relationship between price and quantity
ID: 1139813 • Letter: W
Question
which of the following is true about the relationship between price and quantity supplied?
a)There is always a direct relationship between price and quantity supplied.
b)There is always an inverse relationship between price and quantity supplied.
c)There is usually a direct relationship between price and quantity supplied.
d)There is usually an inverse relationship between price and quantity supply.
I am confused whether the answer is a or c. I know that price and QS are always directed related when ceteris paribus (everything else equal) but the question doesn't state ceteris paribus. So, is the answer c?
Explanation / Answer
The answer should be option (c) that There is usually a direct relationship between price and quantity supply. The use of word usually covers the scenario of ceteris paribus while the world always denotes a larger set and there can be exceptions to the direct relation between quantity supplied and price (for eg. in the case of market supply curve in perfect competition under the assumption that there are decreasing costs with entry of firms)
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