According to the law of supply, price and quantity move along a track in the same direction.
The law of supply basically deals with price and quantity of goods and services. It states that, all other factors being constant, whenever there is increase in the prices of goods and services, it will result to increase in the quantity of goods and services. In other word, when the cost of an item increases, suppliers of such items would want to increase their earnings or profits by increasing the items quantity.
For example, a company that produces a cup will increases the quantity of such item if the prices increases, since the company is looking forward to make more profit.
According to the law of demand, price and quantity move along a track in opposite directions.
The law of demand states that all other factors being equal, when the prices of a good and services is high, the demand for such goods and services will come down. Which means the higher the prices of an item, the lower individual will demand for it.
For example, if the shortage of pineapples in the market leads to higher price, consumers will go for other fruits apart from pineapple. This will certainly result to low demand of pineapples. This is what law of demands means.
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KEYWORDS:
1.
Price and quantity move in the same direction along the track, as per the law of supply.
Further explanation:
Law of supply: The law of supply depicts a relationship between the prices of goods and services in the market and the quantity supplied by the producers. An increase in the price of goods and services will induce producers to supply more for higher profits, keeping other factors constant.
Justification for correct and incorrect option:
along a track in the same direction: This option is correct.
The law of supply explains that with other factors constant, an increase in the price of goods and services will motivate the producers to produce and supply more. This is because raising the quantity supplied with an increase in prices will provide higher profits to the producers. Thus, price and quantity move in the same direction along the track.
along a track in opposite directions: This option is incorrect.
The law of supply depicts that an increase in prices will induce the producers to raise their quantity supplied, keeping other factors constant. The higher prices with the same level of costs provide more profits to producers for supplying more. Thus, the price and quantity do not move in opposite directions.
from different points toward one another: This option is incorrect.
The law of supply describes the nature of association prevailing between price and quantity supplied. It does not explain whether the price and quantity move from different points to converge.
from the same point away from one another: This option is incorrect.
The law of supply does not explain anything about the movement in price and quantity across various points. It does not explain whether the price and quantity move from the same point to diverge.
2.
Price and quantity move in opposite directions along the track, as per the law of demand.
Further explanation:
Law of demand: The law of demand describes the association between prices of goods and services and the quantity demanded by the consumers. An increase in prices of goods and services with other factors constant induces the consumers to demand less quantity as the higher prices imply less satisfaction to consumers by consuming an additional unit of good or service.
Justification for correct and incorrect option:
along a track in the same direction: This option is incorrect.
According to the law of demand, an increase in prices will induce consumers to demand and consume fewer units of goods and services. The law of demand does not indicate the movement in price and quantity in the same direction.
along a track in opposite directions: This option is correct.
With other factors constant, higher prices encourage consumers to demand fewer units of goods and services. This is because a higher price of goods and services implies lower satisfaction to consumers by consuming those expensive units of goods and services. Thus, the law of demand depicts a movement in price and quantity in opposite directions.
from different points toward one another: This option is incorrect.
The association between the price of goods and services and its quantity demanded is explained by the law of demand. The law of demand does not explain whether the price and quantity demanded move from different points to converge one another.
from the same point away from one another: This option is incorrect.
The law of demand does not explain anything about the movement in price and quantity across various points. It does not explain whether the price and quantity move from the same point to diverge.
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Answer details:
Grade: High School
Subject: Economics
Chapter: Demand and Supply
Keywords: according, the law of supply, price and quantity move, along a track, in the same direction, in opposite directions, from different points, toward one another, the law of demand, from the same point, away from each other, association between price and quantity, explanation of the law of supply, the law of demand depicts an association.
