An increase in the demand for a product will cause output to
A) increase and both the demand for and prices of the resources used to produce the product to increase.
B) increase and both the demand for and prices of the resources used to produce the product to decrease.
C) decrease; the demand for the resources used to produce the product will remain constant.
D) decrease; the price of resources used to produce the product will decrease.

Question

Quizplus · Accepted Answer

An increase in demand for a product will result in an increase in output as the producer will look to capitalize on the increased demand. However, as output increases, the demand for the resources used to produce the product will also increase, causing an increase in prices for those resources. This is because producers need to buy more resources to produce the increased output required to satisfy the increased demand. Therefore, Choice A is the correct answer.

An Increase in the Demand for a Product Will Cause