Final answer:
The supply of a good or service is determined by the law of supply, which states that the quantity supplied is positively related to its price. When the price rises, producers are willing to supply more, and when the price falls, producers are willing to supply less. This relationship assumes that all other factors affecting supply are held constant.
Step-by-step explanation:
The supply of a good or service is determined by the law of supply. The law of supply states that the quantity supplied of a good or service is positively related to its price. When the price of a good or service rises, producers are willing to supply more of it, and when the price falls, producers are willing to supply less of it.
For example, when the price of gasoline rises, profit-seeking firms take actions such as expanding exploration for oil reserves, drilling for more oil, investing in pipelines and oil tankers, building new oil refineries, and opening more gas stations. These actions increase the quantity supplied of gasoline.
It's important to note that the law of supply assumes that all other variables that affect supply are held constant. This means that factors such as production costs, technology, and government regulations are not changing.