Certified Supply Chain Professional (CSCP) Practice Exam

Supply typically increases when:

1. The price of the good/service increases

2. The demand for the product decreases

3. Consumer preferences shift away from the product

4. The cost of raw materials increases

The correct answer is: The price of the good/service increases

When the price of a good or service increases, suppliers are generally incentivized to produce and offer more of that good or service to the market. This relationship is rooted in the fundamental principles of supply and demand within economics. As the price rises, it signals to producers that there is an opportunity to make higher profits, prompting them to increase their supply to take advantage of the favorable pricing. In contrast, when the demand for a product decreases, it tends to lead to a reduction in supply, as producers will be less inclined to create a high quantity of a product that is not being purchased. Similarly, if consumer preferences shift away from a product, this likely results in reduced demand, also discouraging suppliers from manufacturing as much. Lastly, when the cost of raw materials increases, it can lead to higher production costs, which may reduce the quantity supplied, as suppliers might find it less profitable to produce the same level of goods at a higher cost. In summary, the increase in price serves as a motivating factor for suppliers to boost production, making it the correct choice regarding the relationship between supply and price.