Question

select all the correct answers.
which statements are true according to the law of supply?

a decrease in demand leads to an increase in supply.

a decrease in demand leads to a decrease in supply.

an increase in price leads to a decrease in supply.

a decrease in price leads to a decrease in supply.

an increase in price leads to an increase in supply.

Explanation:

The law of supply states that, ceteris paribus (all other things being equal), as the price of a good or service increases, the quantity supplied of that good or service increases, and as the price decreases, the quantity supplied decreases. It focuses on the relationship between price and quantity supplied, not directly on demand (demand and supply are related through market equilibrium but the law of supply itself is about price - quantity supplied relationship).

• For "A decrease in demand leads to an increase in supply": The law of supply is not about the relationship between demand and supply directly, so this is incorrect.
• For "A decrease in demand leads to a decrease in supply": Again, the law of supply does not deal with the relationship between demand and supply in this way, so this is incorrect.
• For "An increase in price leads to a decrease in supply": This is the opposite of what the law of supply states, so this is incorrect.
• For "A decrease in price leads to a decrease in supply": This is in line with the law of supply as a lower price makes producers willing to supply less.
• For "An increase in price leads to an increase in supply": This is also in line with the law of supply as a higher price makes producers willing to supply more.

Answer:

D. A decrease in price leads to a decrease in supply, E. An increase in price leads to an increase in supply