Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What does the supply curve represent?

1. The relationship between price and quantity demanded

2. The quantity of goods supplied at various price levels

3. The total market demand for a product

4. The fluctuation of prices over time

The correct answer is: The quantity of goods supplied at various price levels

The supply curve represents the quantity of goods supplied at various price levels. It illustrates how much of a product producers are willing and able to sell at different prices. As the price of a good increases, the quantity supplied typically increases as well, reflecting producers' motivation to maximize their revenue by supplying more at higher prices. This relationship helps in understanding how supply functions within a market, facilitating analysis of changes in market conditions, government policies, and other economic factors that may impact production levels. Other options pertain to different economic concepts; for example, one option mentions the relationship between price and quantity demanded, which instead relates to the demand curve. Another option refers to total market demand, a concept separate from supply dynamics. The fluctuation of prices over time does not directly represent the concepts embedded in the supply curve but rather indicates market variations and trends.