Imagine that the price of leather gloves was high because of high consumer demand for them.
Which statement accurately describes the economic choice that producers of leather gloves would then make?
Producers would increase the supply of leather gloves to meet demand and earn more money.
Producers would decrease the supply of leather gloves to drive the price even higher.
Producers would keep the supply of leather gloves at the same level to maintain the high price.
Producers would decrease the price of leather gloves to increase consumer demand for them.
In this scenario, with high consumer demand for leather gloves, producers are likely to make an economic choice based on maximizing their profits. Let's evaluate each statement to determine which one accurately describes the choice producers would make:
1. Producers would increase the supply of leather gloves to meet demand and earn more money.
This statement aligns with the basic principles of economics. When there is high consumer demand, producers often respond by increasing the supply of goods or services to capitalize on the higher prices and earn more revenue. By increasing the supply of leather gloves, producers can meet the demand and potentially make more money.
2. Producers would decrease the supply of leather gloves to drive the price even higher.
While producers have the ability to manipulate the supply to drive prices higher, it is not a common choice in this scenario. In a competitive market, if one producer decreases the supply, it creates an opportunity for other producers to step in and supply the gloves at the initial high price. This would limit the ability of any single producer to control the price.
3. Producers would keep the supply of leather gloves at the same level to maintain the high price.
Maintaining the supply of leather gloves at the same level may not be the best economic choice for producers. While it could keep the price high in the short term, it may lead to missed opportunities to increase profits by meeting the high demand and capturing a larger market share.
4. Producers would decrease the price of leather gloves to increase consumer demand for them.
This statement is unlikely to be the choice of producers in this scenario. Decreasing the price of leather gloves when consumer demand is already high may not be the most profitable decision. Lowering the price generally decreases revenue unless the increased demand compensates for the lower prices.
Based on the evaluation, the statement that accurately describes the economic choice that producers of leather gloves would make is: "Producers would increase the supply of leather gloves to meet demand and earn more money."