If a baker observes an increase in demand for bread,should the baker increase output or raise prices?
A) increase output
B) raise prices
C) neither increase output nor raise prices
D) It depends on whether the change in demand is driven by inflation or by a stronger preference for bread.

Question

Quizplus · Accepted Answer

The correct response depends on the underlying cause of the demand increase. If the demand rises due to a stronger preference for bread, increasing output might be the best response. However, if the demand increase is driven by inflation, raising prices could be more appropriate to maintain profitability.

If a Baker Observes an Increase in Demand for Bread,should