Falling Oil Prices and the Impact on Production Costs

How do consumers respond to the price incentive brought about by the subsequent increase in supply?

Which of the following illustrates how consumers respond to the price incentive brought about by the subsequent increase in supply?

A. Falling prices lead consumers to purchase fewer kayaks.
B. Falling prices lead consumers to purchase more kayaks.
C. Rising prices lead consumers to purchase fewer kayaks.
D. Rising prices lead consumers to purchase more kayaks.

Consumers' Response to Falling Oil Prices

In this scenario, falling oil prices have significantly lowered the cost of production for many goods, including plastic kayaks. As a result, producers are able to produce larger quantities of kayaks due to the decrease in input costs.

When consumers are faced with falling prices due to the increase in supply, they are more likely to purchase more kayaks. This is because the lower cost of production is passed on to the consumers in the form of lower prices, making kayaks more affordable and attractive for purchase.

With falling oil prices reducing production costs, consumers are presented with a price incentive to buy more kayaks. The decrease in input costs allows producers to offer kayaks at a lower price, which encourages consumers to purchase more of the product.

Consumer behavior is influenced by the price incentive brought about by falling oil prices and the subsequent increase in kayak supply. As prices decrease, consumers are more likely to take advantage of the cost savings and buy more kayaks, leading to an increase in demand and sales for plastic kayak producers.