What would cause prices to drop?
Which of the following would cause prices to drop? A.) Increased production by business. B.) Increased taxes on business. C.) Higher levels of demand by consumers. or D.) A reduction in the money supply. I would truly appreciate any help. This question has been stumping me for 2 days.THANK YOU:)))
Hmmmm. Henry Ford demonstrated the great industrial breakthru on automobiles. Once the production increased, auto prices were affordable.
Is this I/O (industrial/organizational) psychology? Otherwise, I see no connection between the question and psychology.
However, I agree with the previous answer, especially if the business was overstocked with the product.
Prices can drop due to various factors. In the given options, the potential cause for prices to drop would be A.) Increased production by business. When businesses increase their production, they can generate a higher supply of goods or services. This increased supply can lead to a decrease in prices as there is more availability of the product in the market.
On the other hand, the other options mentioned would not directly cause prices to drop:
B.) Increased taxes on business: Increased taxes on businesses would likely increase their costs, which could potentially result in higher prices for the consumers.
C.) Higher levels of demand by consumers: Higher levels of demand usually lead to an increase in prices, as businesses can capitalize on the increased demand and charge higher prices.
D.) A reduction in the money supply: A reduction in the money supply can lead to deflation, which is a general decrease in prices. However, it is not a direct cause of prices dropping and is typically a result of other economic factors.
Therefore, option A.) Increased production by business is the most likely factor to cause prices to drop.
To determine which of the options would cause prices to drop, we need to understand the basic factors affecting price levels.
1. Increased production by businesses (Option A): This can potentially lead to a drop in prices. When businesses produce more goods or services, the supply in the market increases. If the demand remains constant, the increased supply can create a surplus, resulting in a decrease in prices.
2. Increased taxes on businesses (Option B): Increased taxes on businesses would generally increase their costs. If businesses pass on these additional costs to consumers in the form of higher prices, this option would cause prices to rise, not drop.
3. Higher levels of demand by consumers (Option C): Higher consumer demand typically leads to an increase in prices. When demand surpasses the available supply, businesses may increase their prices to capitalize on the increased demand.
4. A reduction in the money supply (Option D): If the money supply is reduced, it can have deflationary effects on the economy. When there is less money circulating, consumers may have less purchasing power, leading to decreased demand. In turn, this can result in lower prices.
Based on the above analysis, the option that would cause prices to drop is Option A - Increased production by businesses. This is because an increase in supply without a corresponding increase in demand is likely to lead to lower prices.