Q.State the Law of Supply. What are its main assumptions?

Price rises : Extension of supply :: Price falls : Contraction of supply.

The law of supply states a direct relationship between the price of a commodity and its quantity supplied, other things remaining constant.

• When price rises, producers find it more profitable to sell more, so quantity supplied increases — this upward movement along the same supply curve is called extension (expansion) of supply.
• When price falls, quantity supplied decreases — the downward movement along the same curve is called contraction of supply.

Both are movements along one supply curve caused by the good's own price, not shifts of the curve.

The correct answer is Positive.

According to the law of supply, other things remaining equal, a rise in price causes a rise in quantity supplied and a fall in price causes a fall in quantity supplied — a direct relationship. Graphically this makes the supply curve slope upward from left to right, which means its slope is positive. (A negative slope would show an inverse relation, as with the demand curve.)

The correct option is Assertion (A) is false but Reasoning (R) is true.

The law of supply states that, other things constant, the quantity supplied of a commodity varies directly with its price — supply rises when price rises and falls when price falls. So assertion (A), which claims supply falls with a rising price, is false. Reasoning (R) — that a seller earns more profit at a higher price — is true, and it is in fact why supply normally rises with price. Since A itself is false, the option 'A false, R true' is correct.

The statement is False.

According to the law of supply, other things being constant, quantity supplied rises when price rises and falls when price falls. Supply is therefore directly (positively) related to price, which is why the supply curve slopes upward from left to right. Hence the statement that supply is indirectly related to price is false.