Suppose that the price of rare earth metals is increasing (this is one of the main components of most smartphones). As a consequence, people expect the price of smartphones to rise next year. Therefore, people will MOST likely:
A)purchase fewer smartphones this year.
B)observe higher prices for smartphones this year.
C)purchase the same amount of smartphones, since this expectation will have no effect on consumers this year.
D)decide to wait and purchase the smartphones next year.

Question

Quizplus · Accepted Answer

When people expect the price of smartphones to rise next year due to the increasing price of rare earth metals, they will most likely observe higher prices for smartphones this year. This is because the manufacturers and retailers will try to maintain their profit margins by passing on the increased cost of rare earth metals to the consumers. Therefore, option B is the best choice.

Suppose That the Price of Rare Earth Metals Is Increasing