AN INCREASE IN THE PRICE OF PRUDUCT WILL REDUCE THE AMOUNT OF IT PURCHASHASED BECAUSE
AN INCREASE IN THE PRICE OF A PRODUCT WILL REDUCE THE AMOUNT OF IT PURCHASED BECAUSE:
When the price of a product increases, it creates a higher cost for consumers to acquire the product. As a result, the demand for the product decreases. This decrease in demand occurs due to the following factors:
1. Income Effect: When the price of a product increases, consumers' purchasing power decreases. This reduction in purchasing power means that consumers have less disposable income to spend on that particular product. Consequently, they may choose to purchase less of it or even forego buying it altogether.
2. Substitution Effect: If the price of a product increases, consumers are more likely to seek alternative products that provide a similar benefit at a lower cost. Consumers may switch to substitutes or alternatives that are more affordable or offer better value for their money. This substitution effect leads to a decrease in the demand for the higher-priced product.
3. Law of Demand: The law of demand states that when the price of a product increases, the quantity demanded decreases, assuming all other factors remain constant. This law reflects the inverse relationship between price and quantity demanded. As the price rises, consumers are less willing or able to purchase the product, resulting in a decline in the quantity demanded.
To summarize, an increase in the price of a product will reduce the amount of it purchased due to the income effect, substitution effect, and the law of demand.