Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which term refers to the willingness of firms to provide goods at a certain price?

1. Demand

2. Stock

3. Supply

4. Market equilibrium

The correct answer is: Supply

The term that refers to the willingness of firms to provide goods at a certain price is supply. Supply captures the relationship between the quantity of a good that producers are willing to sell and the price of that good. As prices rise, firms typically have more incentive to produce and sell more, while at lower prices, they may be less willing to do so due to reduced profitability. Demand, on the other hand, focuses on consumers' willingness to purchase goods at various prices. Stock refers to the amount of a good available in inventory, while market equilibrium is the point where the quantity supplied equals the quantity demanded. Understanding supply is crucial for analyzing how market dynamics change with different price levels and how this affects overall production and pricing strategies in a business context.