When the price of a product or service increases, it typically leads to a decrease in demand for that particular product or service. This is due to the basic economic principle of the law of demand, which states that as the price of a good increases, the quantity demanded for that good decreases.
Here's how it works:
1. Higher Price, Lower Demand: When the price of a product goes up, consumers tend to buy less of that product because it becomes more expensive for them to purchase. This results in a decrease in the quantity demanded.
2. Substitutes: When the price of a product increases, consumers may look for cheaper alternatives or substitutes for that product. As a result, the demand for substitutes may increase while the demand for the more expensive product decreases.
3. Complements: On the other hand, an increase in price may also affect complementary goods. If the price of a product like coffee increases, the demand for complementary goods like sugar or cream may decrease since people are buying less coffee.
In conclusion, for most products and services, an increased price leads to a reduced demand for that specific product, an increased demand for substitutes, and a potential decrease in demand for complements.
