a companys new energy drink is selling well. as a result, the company raises the price to increase profits…

a companys new energy drink is selling well. as a result, the company raises the price to increase profits. demand stays about the same after this change. encouraged, the company raises the price again. this time, demand for the energy drink declines, as customers begin buying substitute goods. the company decides to lower the price of the drink. what does this scenario best illustrate? consumers limit prices through their buying decisions. producers may ignore important signals from consumers. consumers are powerless when producers raise prices. producers mostly consider production costs when setting prices.

a companys new energy drink is selling well. as a result, the company raises the price to increase profits. demand stays about the same after this change. encouraged, the company raises the price again. this time, demand for the energy drink declines, as customers begin buying substitute goods. the company decides to lower the price of the drink. what does this scenario best illustrate? consumers limit prices through their buying decisions. producers may ignore important signals from consumers. consumers are powerless when producers raise prices. producers mostly consider production costs when setting prices.

Answer

Brief Explanations:

The company first raises prices as demand is stable and then sees a decline in demand when raising prices again as consumers switch to substitutes. This shows that producers need to consider consumer - demand signals. Producers ignoring consumer signals can lead to negative consequences like decreased demand.

Answer:

Producers may ignore important signals from consumers.