Question

How would a bicycle producer likely react to a shortage of its product?a. by holding special clearance sales of its inventoryb. by keeping storers open longer hoursc. by raising prices and reducing quantity supplyd. by raising prices and increasing quantity supply

Answer 1

The correct option here is D) by raising prices and increasing quantity supply.

Step-by-step explanation:

If a producer knows that the product in which he or she deals is in shortage in the overall market , then the producer will increase the prices of that product because in the market its supply is less than the demand , which means producer can increase the prices of its products and consumers would have to buy the product at that price only if they want to satisfy their need . Also producer would want to increase the quantity of its products too because with high prices and more sales, the producer would be able to book higher profits.