Which of the following best describes the law of supply?

The law of supply states that, all else being equal, an increase in price results in an increase in the quantity of a good or service that producers are willing to supply. This relationship occurs because higher prices typically provide an incentive for producers to increase production; they can earn more revenue and potentially higher profits when prices rise.

When prices increase, suppliers are motivated to allocate more resources toward production to take advantage of the higher rates, thus expanding the quantity supplied. This fundamental principle indicates a direct relationship between price and quantity supplied, reinforcing why the option stating that higher prices encourage increased supply is the best description of the law of supply.

In contrast, options discussing lower prices reducing quantity supplied or stating that prices have no impact on supply do not reflect this basic economic principle. The assertion that supply is always elastic disregards the conditions under which supply may be inelastic, where producers cannot increase production easily in response to changing prices.