Master the IB International Economics HL 2026 – Elevate Your Knowledge and Ace the Exam!

The law of supply asserts that, all else being equal, as the price of a good or service increases, the quantity supplied by producers also increases. This relationship occurs because higher prices typically provide greater incentive for companies to produce more of a good, as their potential for profit increases. When producers anticipate they can sell at a higher price, they are often more willing to allocate resources toward the production of that item, leading to an increase in quantity supplied in response to rising prices.

Understanding this concept is fundamental in economics, as it highlights how price changes can influence producer behavior and market supply dynamics. In contrast, the other options address scenarios that do not align with the principle of supply. For example, the idea that an increase in price could lead to a decrease in quantity supplied contradicts this foundational economic law.