Question

which of the following three statements are true? I) Increases in prices of a good incentivize consumers to economize by using less and seeking alternatives. II) Increases in prices of a good incentive firms to bring more goods to market. III) Increases in input costs incentivize firms to economize by seeking out substitutes and alternatives, and use technology to conserve on the input.

a- II only

b-I,II ,III

c-I ,II

d- I only

Answer 1

Ans: I,II ,III

Explanation:

Since price and quantity demanded is inversely related, Increases in prices of a good incentivize consumers to economize by using less and seeking alternatives. Thus, statement I is true.

Since price and quantity supplied is positively related, Increases in prices of a good incentive firms to bring more goods to market. Thus, statement II is true.

Increases in input costs leads to increases in cost of production. So, Increases in input costs incentivize firms to economize by seeking out substitutes and alternatives, and use technology to conserve on the input. Thus, statement III is true.