Future Business Leader Achievments (FBLA) Economics Practice Exam

What describes the relationship between price and quantity supplied?

1. The supply curve

2. The demand curve

3. The market equilibrium

4. The production possibility frontier

The correct answer is: The supply curve

The supply curve illustrates the relationship between price and quantity supplied. It is typically depicted as an upward-sloping line on a graph where the x-axis represents quantity supplied and the y-axis represents price. This upward slope indicates that as the price of a good or service increases, producers are willing to supply a greater quantity of that good or service. This occurs because higher prices can lead to increased potential for profit, incentivizing producers to increase their output. The supply curve is a fundamental concept in economics that helps to visualize how market dynamics work regarding supply and pricing. In contrast, the demand curve represents the relationship between price and quantity demanded, showing how consumers are willing to purchase more of a good as its price decreases. Market equilibrium refers to the point where the supply and demand curves intersect, indicating the price at which the quantity supplied equals the quantity demanded. The production possibility frontier, on the other hand, illustrates the maximum feasible amount of two goods that can be produced given available resources and technology, rather than focusing specifically on price and quantity relationships.