An increase in the price of a good
A) increases the incentive to buy the good, but decreases the incentive to sell the good.
B) decreases the incentive to buy the good, but increases the incentive to sell the good.
C) increases both the incentive to buy the good and the incentive to sell the good.
D) decreases both the incentive to buy the good and the incentive to sell the good.

Question

Quizplus · Accepted Answer

If the price of a good increases, the demand for the good generally decreases, reducing the incentive to buy the good. However, the increase in price incentivizes sellers to produce and sell more of the good, increasing the incentive to sell. Therefore, the correct answer is B, which states that an increase in the price of a good decreases the incentive to buy the good but increases the incentive to sell the good.

An Increase in the Price of a Good