A Decrease in Supply Raises the Price of a Good

question 72

True/False

A decrease in supply raises the price of a good, but it also decreases the quantity demanded, which lowers the price of a good. The net effect on price is ambiguous.

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Definitions:

Purchases Returns

Goods returned by a buyer to the seller, often due to defects or dissatisfaction, resulting in a refund or credit.

Purchase Discounts

Discounts a buyer receives for paying suppliers early, which are used to reduce the cost of purchased goods.

Net Purchases

Net purchases are the total amount of purchases minus returns, allowances, and discounts over a specified period, often used in analyzing inventory costs.

Sales Discounts

Reductions in the price of goods or services offered as an incentive to customers to encourage prompt payment.