Question
When price rises supply expands.
✓
Answer
Yes, I agree with this statement.
- According to the Law of Supply “Other things remaining constant more is supplied < at a higher price and less at a lower price.”
- The rise in price causes an expansion in supply because (i) the existing sellers will supply more than before in order to get larger profit and (ii) new suppliers with high reservation price will also now enter S the market.
- So supply expands when price rises.
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