Option 1 -> Incorrect. Higher prices incentivize producers to supply more, not less.
Option 2 -> Incorrect. Price is a key determinant of quantity supplied according to the law of supply.
Option 3 -> Correct. According to the law of supply, there is a positive relationship between price and quantity supplied.
Option 4 -> Incorrect. This refers to demand, not supply. The question asks about the effect on supply.
Hence, Option 3: It increases the quantity supplied -> According to the law of supply, when the price of a good increases, producers are willing and able to supply more of that good to the market. This is because higher prices make production more profitable, encouraging suppliers to increase output. This creates an upward-sloping supply curve, showing the direct positive relationship between price and quantity supplied. -> correct