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the higher the price, the larger the quantity produced
Maximillian Hermann
Wiki User
∙ 10y agoAssumptions to the Law:
This law is based on the following assumptions as mentioned:
- Cost of production:
It is assumed that the price of the product changes without any change in the cost of production. If the cost of production rises along with the rise in the price of the product, it is not profitable for the sellers and they will not sell more quantity.
- No change in the techniques of production:
The techniques used in production process should remain constant. This is an important condition to maintain constancy of the cost of production s constant one.
- Scale of production:
During the production process, there should not be any change in the scale of production. If there is any change in the scale of production, there will be change in supply, irrespective of the change in the price of the commodity.
- No changes in Government policy:
Government policies like taxation, trade policy etc. are assumed to be constant. For example if there is any change in levy tax or change in quota for raw materials or change in the policies regarding export or import of a commodity, then in that case supply cannot be increased with a rise in price.
- No change in transport cost:
It is assumed that transport costs are unchanged. Any reduction or increase in transport cost will affect the supply of the commodity without any change in price.
- No speculation:
It is assumed that the sellers do not speculate about the future changes in the price of the product. If they expect a rise in price in future, they will not supply more today even if the present price is high.
- Constancy of price of related goods:
It is assumed that there are no change in the price of related goods. If the price of other commodity rises much faster than this commodity then the sellers will start producing that commodity by shifting the raw-materials towards the production of that commodity which is a profitable one.
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What is the principle of the law of supply?
the higher the price, the larger the quantity produced
When according to the law of supply and demand when supply increases what else happens?
According to the law of supply and demand when supply increases, prices will decrease.
Exceptions of law of supply?
Many ExceptionsWhile the law of supply generally reflects what happens on the supply side of market, it is not a universal principle that applies to all markets under all circumstances. There are, in fact, numerous important exceptions to the law of supply. In particular, if the supply side of the market is controlled by small number of sellers (including a single seller), then the law of supply might not operate. For example, monopoly, which is a market with a single seller, is not necessarily inclined to offer a larger quantity supplied even though the price is higher. Market control by the monopoly allows it to set the market price based on demand conditions, without cost constraints imposed from the supply side. Other market structures, including oligopoly andmonopolistic competition, might have more competition, but market control can also negate the law of supply.
Why is supply and demand important in capitalism?
For someone who's venturing into entrepreneurship, knowledge of the law of supply and demand would be of great help in decision making in terms of investing and allocating capital. An understanding on this principle also help to map out operational or strategic plans of a particular business.
Explain the law of supply in your own words?
Law of supply: If demand is held constant, an increase in supply leads to a decreased price, while a decrease in supply leads etc
What is the principle of the law of supply?
the higher the price, the larger the quantity produced
Where can one find information regarding the law of supply?
The law of supply is a fundamental principle of economic theory. One can find information about the law of supply on various websites like Wikipedia and Investopedia. These sites provide a lot of information regarding the law of supply.
What is the colman principle of law?
the Coleman principle of law is when sam has the sam haircut as his mother. the Coleman principle of law is when sam has the sam haircut as his mother.
Is the Archimedes Principle a theory or a law?
It was a law not the theory because this principle has also proved by him.
What is the principle that a law may not be implemented retrospectively?
The principle that a law may not be implemented retrospectively is known as the principle of non-retroactivity. It means that a law cannot apply to events that occurred before the law was enacted. This principle is important for ensuring fairness, predictability, and legal certainty in a legal system.
Law of demand and supply?
Consumers is the law of supply and demand.
Is the Uncertainty Principle a scientific law or theory?
Since it is called "the Heisenberg Uncertainty Principle" it is neither a scientific law nor a theory. It is a principle.
What According to the law of supply and demand when supply increases what else happens?
According to the law of supply and demand when supply increases, prices will decrease.
What is the basic economic principle that decides how high wages will be?
Supply and demand is the economic principle that decides how high wages will be
Who was the principle founder of Constitutional law in America?
The principle founder of constitutional law in America was James Madison. This is why he is referred to as the father of the constitution.
When according to the law of supply and demand when supply increases what else happens?
According to the law of supply and demand when supply increases, prices will decrease.
Exceptions of law of supply?
Many ExceptionsWhile the law of supply generally reflects what happens on the supply side of market, it is not a universal principle that applies to all markets under all circumstances. There are, in fact, numerous important exceptions to the law of supply. In particular, if the supply side of the market is controlled by small number of sellers (including a single seller), then the law of supply might not operate. For example, monopoly, which is a market with a single seller, is not necessarily inclined to offer a larger quantity supplied even though the price is higher. Market control by the monopoly allows it to set the market price based on demand conditions, without cost constraints imposed from the supply side. Other market structures, including oligopoly andmonopolistic competition, might have more competition, but market control can also negate the law of supply.
