One Factor Leading to Price Increases Is Overdemand

question 46

Essay

One factor leading to price increases is overdemand. When a company cannot supply all of its customers, it can raise its prices, ration supplies to customers, or both. What are four different ways the price can be raised?

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Definitions:

Resource Demand Schedule

A table or graph showing the quantity of a resource that firms are willing and able to hire at different wages or prices.

Firm

An organization that produces and sells goods or services in order to make a profit.

Derived Demand

Derived demand refers to the demand for a good or service that arises from the demand for another good or service it produces or contributes to.

Labor Service

The work performed by employees for employers, contributing to the production of goods or the provision of services in exchange for wages.