Future Business Leader Achievments (FBLA) Economics Practice Exam

Which of the following will lead to more output at lower prices?

1. A decrease in supply

2. An increase in supply

3. A decrease in demand

4. An increase in demand

The correct answer is: An increase in supply

An increase in supply will lead to more output at lower prices due to the fundamental principles of supply and demand in a market economy. When supply increases, it means that producers are willing and able to sell more goods or services at various price levels. This increased availability of products generally results in a decrease in prices as sellers compete to attract buyers, leading to higher sales volumes. With more goods available in the market, consumers benefit from a greater selection and potentially lower prices, making it more attractive for them to purchase. Additionally, as prices decrease, the quantity demanded may also increase, further reinforcing the cycle of increased output. This dynamic illustrates the positive relationship between supply and price levels, clearly demonstrating how an increase in supply facilitates greater output and market accessibility at lower costs for consumers.