The price of producing a $4 chocolate bar goes up, so the seller of the chocolate bar raises the price to $5. A student describes the effect on the demand for the chocolate, saying, "Since the price goes up, the quantity demanded will go up." Evaluate the student's answer.

Question

26-02-2016
Business

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The price of producing a $4 chocolate bar goes up, so the seller of the chocolate bar raises the price to $5. A student describes the effect on the demand for the chocolate, saying, "Since the price goes up, the quantity demanded will go up." Evaluate the student's answer.

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Аноним Аноним · Answer 1 · 2016-02-26T19:14:12+01:00

This is incorrect (what the student is saying) obviously the quantity should be bigger to be worth the $5 dollars you are spending. But what it is saying is since a chocolate bar once sold for $4 is taking more money to produce they need to raise the price so that they earn money as well. If they are spending all the money that they earn from that $4 chocolate bar then they earn nothing and business goes down.