Question

What explanations have economists offered for why firms​ don't raise prices when doing so would seem to increase​ profits? Firms might not raise prices when doing so might increase profits because

Answer 1

Answer: To keep the customer base

Explanation: The consumers find it unfair when the firms increase their prices continuously even though there was an increase in demand from the last increase in price.

Although, Customers do not mind when the prices are increased due to an increase in cost to the supplier. Therefore,unnecessary increase in price might result in loss of popularity of the product and further the loss of customer base.

That's the reason why firms do not increase their prices even though it will increase their profits.