Why do prices increase when demand for a product is high? A. Companies know they can make more money by selling fewer products at higher prices.
B. Companies know that people will be willing to spend more to get an in-demand product.
C. Companies take advantage of the demand to make people spend more money on excess products.
D. Companies know they can stop production and still make money on sales.
Why do prices increase when demand for a product is high?
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The correct answer is B. Companies know that people will be willing to spend more to get an in-demand product.
When demand for a product is high, consumers are often willing to pay more for it because they want or need that product. Companies recognize this willingness and may increase prices to maximize their profits. This dynamic is part of the basic principles of supply and demand in economics, where higher demand typically leads to higher prices. If you’d like more in-depth help on this topic or related concepts, check the extended services page!