Business, 04.11.2019 03:31 eli761029

Why do prices increase when demand for a product is high?

companies know they can make more money by selling more products at higher prices.
companies know that people will be willing to spend more to get an in-demand product.
companies take advantage of the demand to make people spend more money on excess products.
companies know they can stop production and still make money on sales.

Answers: 1

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The best answer for this statement would be:

companies know that people will be willing to spend more money to get an in demand product.

This is based on the consumer’s behavior, it is because of the “want” of that certain product that people tend to want to spend more for it.

Answer from: camk4420

The correct option is (B). When the demand for goods or services is high, prices increase because companies know that people will be willing to spend more to get an in-demand product.

Further Explanation:

Law of Demand:

According to the law of demand, when the price of the goods increases, quantity demanded will fall, and when the price of the goods decreases, the quantity of good demanded will increase while other things remain constant. So, the price of the pants increase, the quantity demanded will decrease.

Justification for the correct and incorrect option:

(A)

Companies know they can make more money by selling more products at higher prices: This option is incorrect.

If the companies increase the supply of the product in the market, then it will put downward pressure on the prices. Hence companies will not be able to earn more.

(B)

Companies know that people will be willing to spend more to get an in-demand product: This option is correct.

When the demand for goods and services is high, prices increase because companies know that people will be willing to spend more to get an in-demand product, and companies will be able to earn more profit.

(C)

Companies take advantage of the demand to make people spend more money on excess products: This option is incorrect.

The high demand will increase the prices of the goods, and Consumers will only buy the quantity they need, not in excess of what they need.

(D)

Companies know they can stop production and still make money on sales: This option is incorrect.

The companies cannot stop production because if they stop production, they will not be able to sell products in the market.

Learn more:

1.Learn more about the demand and supply

2.Learn more about the demand curve

3.Learn more about the effect of demand

Answer details:

Grade: Middle School

Subject: Economics

Chapter: Law of Demand

Keywords: Law of Demand, demand for a product is high, prices increase, by selling more products at higher prices, to get an in-demand product, can stop production.

Answer from: Quest

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi

Answer from: Quest

Via: "if you are found to be supplying or dealing drugs, the punishment is likely to be tough. supplying drugs doesn’t just apply to dealers. if police suspect that you intend to share drugs with your friends, this is still considered to be supplying.

being suspected of supplying drugs means you are much more likely to be charged. the amount of drugs found on you, and whether you have a criminal record, will be taken into account when a punishment is being decided.

decisions to prosecute are taken by the public prosecution service. the maximum sentences for intent to supply drugs are:

- up to life in prison or an unlimited fine (or both) for a class a drug- up to 14 years in prison or an unlimited fine (or both) for a class b or class c drug."sorry if this was a school question, you didnt supply options so i assumed it was a personal question, which if it is, reconsider selling or having possesion of any drugs at all. i wish you the best!

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Why do prices increase when demand for a product is high?

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