An increase in the price of a good
A) Increases the incentive to buy the good, but decreases the incentive to sell the good
B) Decreases the incentive to buy the good, but increases the incentive to sell the good
C) Increases both the incentive to buy the good and the incentive to sell the good
D) Decreases both the incentive to buy the good and the incentive to sell the good

Question

Quizplus · Accepted Answer

According to the law of demand, as the price of a good increases, the quantity demanded decreases. Therefore, consumers have less incentive to buy the good as it becomes more expensive. On the other hand, suppliers have more incentive to sell the good at a higher price as they can earn higher profits. Hence, an increase in the price of a good decreases the incentive to buy the good but increases the incentive to sell the good.

An Increase in the Price of a Good