Would a sudden increase in the price of a product cause more or less people to buy it?
1. More
2. LeSS
2. Less
A sudden increase in the price of a product would generally cause fewer people to buy it.
A sudden increase in the price of a product generally results in fewer people buying it. This is because when the price of a product rises, it becomes relatively more expensive compared to other alternatives. As a result, some potential buyers may decide that the higher price is not worth the value they would receive from the product.
To understand why this happens, economists often refer to the concept of demand and the law of demand. The law of demand states that as the price of a product increases, the quantity demanded decreases, assuming all other factors remain constant. This means that when the price of a product goes up, people tend to buy less of it.
This conclusion is based on several factors:
1. Budget constraints: When the price of a product rises, people's limited budgets may not allow them to purchase the same quantity they used to afford. They may choose to allocate their funds to other goods or prioritize their spending differently.
2. Substitution effect: A higher price may encourage consumers to switch to other similar products that are more affordable. For example, if the price of a particular brand of cereal increases, consumers may choose to buy a different brand or type of cereal that offers similar nutritional value at a lower price.
3. Income effect: If the price increase makes a product significantly more expensive, it may affect people's disposable income, leading them to cut back on non-essential purchases.
Overall, an abrupt rise in the price of a product usually leads to a decrease in demand, resulting in fewer people choosing to buy it.