Final answer:
Stores generally do not raise prices to increase demand because it contradicts the basic model of demand and supply, where higher prices typically reduce demand unless dealing with Veblen goods.
Step-by-step explanation:
The student asks why stores don't raise prices to increase demand. This is counterintuitive to the basic model of demand and supply, which suggests that as prices rise, demand typically decreases. However, this query raises the concept of Veblen goods, where higher prices may signal higher quality or exclusivity leading to increased demand, but this is the exception and not the norm. Generally, monopolistically competitive firms may try to increase demand through various strategies other than pricing, such as product differentiation, improving quality, or enhancing customer service. Raising prices without consideration of these factors can lead to a decrease in demand, especially as consumers become more informed or when pricing exceeds perceived value as mentioned in the information given. It is also critical to understand that in a perfectly competitive market, firms are price takers, not price makers, and they cannot increase prices to increase profits.