The decrease in the demand for mainframe computers caused manufacturers of mainframe computers to reduce prices by 20%. This is an example of
A) inflation.
B) deflation.
C) a sustained inflation.
D) the operations of supply and demand.

Question

Quizplus · Accepted Answer

The decrease in demand caused a surplus of mainframe computers, leading to manufacturers reducing prices in order to stimulate demand. This is an example of the operation of supply and demand. Option A is incorrect as inflation refers to a general increase in prices, and not a reduction in prices as in this case. Option B is also incorrect as deflation refers to a sustained reduction in prices across the economy, which is not necessarily the case in this scenario. Option C is incorrect as sustained inflation refers to a continuous increase in prices, and is not applicable here.

The Decrease in the Demand for Mainframe Computers Caused Manufacturers