Anon Corporation is a manufacturer of Widgets. Faced with increasing input material costs, the company is contemplating a price increase in the range of 15-20 percent. There are significant disagreements among senior personnel in the company about this move. Assuming other factors remain constant, Anon would have the most power to raise prices if Widgets were which of the following?
A) Life-saving drugs
B) Automobiles
C) Beverages
D) Toys
E) Jewellery

Question

Quizplus · Accepted Answer

When it comes to life-saving drugs, consumers have limited options and are often at the mercy of the manufacturers. In such cases, the manufacturers have a higher bargaining power and can increase the prices without losing customers. Additionally, the demand for life-saving drugs is usually inelastic, meaning that consumers will pay the higher price as it is critical to their health and well-being. Therefore, Anon Corporation would have the most power to raise prices if Widgets were life-saving drugs.

Anon Corporation Is a Manufacturer of Widgets