1.

State the reason for positive relationship between price and supply.ORThere is a direct positive relationship between price and supply. Give reason.

Answer»

There are two reasons for positive relationship between price and supply. They are:

  1. Sellers keep in mind the objective of profit maximization. So, when price rises they see the possibility of increasing profits. Thus, they supply more at a higher price.
  2. When price rises, those producers who were not willing to sell their stocks at lower price start selling the stocks.


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