Question

Which of the following situations would occur if the price of the pen that you had earlier purchased at Rs. 10 increases to Rs. 20?

• A. Demand of the pen will increase.
• B. Demand of the pen will decrease.
• C. Producers will supply more pens.
• D. Producers will supply less pens.

Answer 1

Answer: (B), (C)

Producers will supply more pens.

If the price of a product increases, consumers will demand less of that product but producers will try to supply more of it. It is because the producers will gain more profits if they sell more of that product. In the above case, the same price mechanism is applied. Therefore, the demand of the pen will decrease while the supply of the pen will increase when the price of the pen increases.