Aree has a smoothie business. The average price of smoothies in her city rises, and this encourages Aree to increase the price and the quantity that she produces. Her response to the price increase is an example of price functioning as

Question

Quizplus · Accepted Answer

Aree's response to the rising price of smoothies shows that price is functioning as an incentive for her to increase both the price and quantity of her product. The higher price signals to Aree that there is likely more demand for her product, and so she responds by increasing her supply to capitalize on this opportunity to make more profit.

Aree Has a Smoothie Business