Question

Demand for bikes has suddenly increased and the market price has risen from 50 to 60.In three to five sentences explain how this change will affect profits?

Answer 1

Answer:

If the market price of bikes rises from $50 to $60, then the company will want to produce a larger quantity of bikes. This is because the overall marginal revenue is now higher and will be maximized differently. Before profit was maximized at six bikes, now the profit will be maximized by producing more bikes, perhaps seven.

Explanation:

Answer 2

Because the demand has gone up too, the bikes should gain more profit. Eventually there will be too many bikes produced and their value will drop.