Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What information does the supply curve provide?

1. The quantity of a good supplied at various price points

2. The total demand of a good at different price levels

3. The fixed costs associated with production

4. The relationship between price and consumer sentiment

The correct answer is: The quantity of a good supplied at various price points

The supply curve provides the quantity of a good that producers are willing and able to sell at various price points. This relationship illustrates how the quantity supplied changes in response to price variations. As the price of a good increases, the supply curve typically indicates that producers are more willing to offer more of the good for sale. Conversely, if the price falls, the quantity supplied tends to decrease. This fundamental principle is essential in understanding market behavior and helps in analyzing how supply and demand interact to determine market equilibrium. In contrast, other options focus on different aspects: total demand relates to consumer behavior, fixed costs pertain specifically to production expenses, and the relationship between price and consumer sentiment involves psychological factors influencing purchasing decisions. Thus, the supply curve is distinctly characterized by its focus on the quantities suppliers are prepared to offer at differing market prices.