According to the law of supply, if the price of electric ranges increased, everything else held constant (ceteris paribus), then (A) the supply of electric ranges would decrease. (B) the demand for gas ranges would decrease. (C) the demand for electric ranges would increase. (D) the supply of dishwashers would increase. (E) the quantity supplied of electric ranges would increase.

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Shepherd

23 December, 15:58

According to the law of supply, if the price of electric ranges increased, everything else held constant (ceteris paribus), then (A) the supply of electric ranges would decrease. (B) the demand for gas ranges would decrease. (C) the demand for electric ranges would increase. (D) the supply of dishwashers would increase. (E) the quantity supplied of electric ranges would increase.

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Anabel Hart · Answer 1

(E) the quantity supplied of electric ranges would increase.

Explanation:

The law of supply, as the name indicates, only considers the effects of changes in price on supply. Therefore answers B, C and D shouldn't be considered at all.

As the price of electric ranges has increased, there is a bigger incentive for suppliers to increase their output. The term 'ceteris parabis' is important here as other factors can influence supply as well, so we need to know that nothing else has changed. Suppliers now have increased profits so they will produce more units to maximise their profits.