Question

Which of the following typically happens as prices for a good or service rises?a. suppliers leave the marketb. consumers seek more of the good or service to consumec. demand becomes increasingly elasticd. more suppliers enter the market

Answer 1

The correct answer is option D.

Step-by-step explanation:

As the price of product increases the consumers will demand less because they now have to pay more than earlier.

The supply however is directly related to price level and will increase with the increase in price. The producers will produce more in order to enjoy higher revenue and profit.

This would encourage the other potential firms to enter the market, to earn higher profits.So more suppliers will enter the market.

However, this would lead to increase in supply of output. The excess supply will cause the price to fall eliminating higher profits.