The law of supply states that, all else equal, higher prices lead to

• A. Lower prices reduce supply.
• B. Taxes deter supply.
• C. Supply is fixed and unresponsive.
• D. Higher prices lead to greater quantities supplied.

Answer: (D)

The key idea is the positive relationship between price and quantity supplied, holding all other factors constant. When the price rises, producers can earn more from each unit and cover higher marginal costs, making it worthwhile to produce and offer more units for sale. This incentive to supply more as price increases is what creates the upward-sloping supply relationship, so higher prices lead to greater quantities supplied.

The other statements involve factors outside this price-quantity link or contradict the basic idea: taxes affect supply but are about policy, not the direct price-quantity relationship; supply isn’t fixed and unresponsive to price, it changes as prices change; and lowering prices would typically reduce the quantity supplied, not increase it.