When Demand Increases in the Consumer Market, the Business Market

question 118

Short Answer

When demand increases in the consumer market, the business market reacts by accelerating the buildup of inventories and increasing plant capacity. This phenomenon is known as the ______________ principle.

---

Definitions:

Variable Cost

Costs that change directly in proportion to changes in the volume of production or sales, such as raw materials and direct labor.

Contribution Margin

The amount by which a product's sales price exceeds its variable costs, indicating how much contributes to covering fixed costs and generating profit.

Machine Hour

A measurement of production time, counting one hour of operation of a machine or a piece of equipment for manufacturing purposes.

Sales Margin

The difference between the selling price of a product and the cost of goods sold, expressed as a percentage of sales, indicating the profitability of a product.