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Difficulty: MediumConcept and Law of Supply

A poultry farmer in Ogun State increases weekly egg production from 150150 crates to 220220 crates following an increase in market price from N2,000\text{N}2,000 to N2,800\text{N}2,800 per crate, while input costs remain constant. Which of the following economic principles is directly illustrated by the farmer's behavior?

  1. The law of supply, which establishes a direct relationship between price and quantity suppliedAnswer
  2. B
    An expansion of market supply caused by a shift in the supply curve
  3. C
    Centralized resource allocation directed by the government price mechanism
  4. D
    An inverse relationship between the commodity price and quantity offered for sale

Answer

The farmer's behavior illustrates the law of supply, which states that, ceteris paribus, higher prices lead to an increase in quantity supplied.
The correct answer states the law of supply. When price increases while other conditions remain unchanged (ceteris paribus), profit-maximizing producers are willing to supply a greater quantity, demonstrating a direct (positive) relationship between price and quantity supplied.

Step-by-Step Solution

1
Analyze the change described in the scenario
Market price rose from N2,000\text{N}2,000 to N2,800\text{N}2,800, and the farmer's quantity offered increased from 150150 to 220220 crates.
Identifying the variable causing the reaction (price) and the response variable (quantity supplied).
2
Apply economic concepts of supply
Because price and quantity supplied move in the same direction while other factors remain constant (ceteris paribus), this represents a movement along the supply curve.
The law of supply states that price and quantity supplied are directly related.

Key Concept

Law of Supply
Estimated Time:1m 0s
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Topics

Concept and Law of Supply

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