If a company needs to raise the prices of some its products, it should choose to raise the prices of
Blank
______ products because relatively fewer customers will stop buying the product as a result.

Question

If a company needs to raise the prices of some its products, it should choose to raise the prices of 
Blank
______ products because relatively fewer customers will stop buying the product as a result.

BlackTom AI · Accepted Answer

When a firm considers raising prices, the impact depends on how sensitive buyers are to price changes.
Option 1: 'inelastic' — This choice correctly identifies products with inelastic demand, where quantity demanded changes little when price changes. Because relatively fewer customers stop buying, raising prices can increase revenue and profit on those items.
Option 2: 'commodity' — While commodities are often basic goods, this option doesn't specify the price sensitivity or elasticity. A commodity can have elastic or inelastic demand depending on the market, so labeling it as a reason to raise prices is not directly addressing consumer response to price changes.
Option 3: 'elastic' — If demand were elastic, a price increase would lead to a disproportionately large drop in quantity demanded, reducing revenue and potentially hurting profitability. This makes it a poor rationale for raising prices.
Option 4: 'moderately priced' — Being moderately priced describes a level of price but does not speak to how sensitive customers are to price changes. Without information about elasticity, this choice doesn't justify raising prices since it could still affect demand significantly depending on the product and market.

If a company needs to raise the prices of some its products, it should choose to raise the prices of Blank ______ products because relatively fewer customers will stop buying the product as a result.

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