Question

select the correct answer. jack sells homemade chocolates and cookies. he expects the price of chocolates to increase around valentines day, so he prepares to make more chocolates in february. which economic concept lies behind jacks decision to make more chocolates in february?
a. equilibrium
b. law of demand
c. law of supply
d. negative externality
e. positive externality

Explanation:

To solve this, we analyze each option:

• Option A (equilibrium): Refers to a state where supply and demand balance. Jack's decision is about increasing supply due to expected price rise, not equilibrium. Eliminate A.
• Option B (law of demand): Deals with how quantity demanded changes with price (inverse relationship). Jack's action is about supply, not demand. Eliminate B.
• Option C (law of supply): States that as price is expected to rise (for chocolates around Valentine's Day), producers (Jack) will increase the quantity supplied (make more chocolates). This matches Jack's decision.
• Option D (negative externality): Occurs when a production/consumption activity imposes a cost on a third - party. Not related to Jack's supply decision. Eliminate D.
• Option E (positive externality): Occurs when a production/consumption activity benefits a third - party. Not related to Jack's supply decision. Eliminate E.

Answer:

C. law of supply