If producers, but not consumers, begin to expect prices of the good they produce to increase in the near future, what will happen to the market price now

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08-02-2022
Business

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If producers, but not consumers, begin to expect prices of the good they produce to increase in the near future, what will happen to the market price now

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Parrain Parrain · Answer 1 · 2022-02-17T12:14:22+01:00

Should producers believe that market prices will rise in the near future, the current market price will increase.

Why would the price increase?

Producers would expect to make more profit in future so they will reduce their current output to be able to sell more when prices rise.

As a result of this decrease in supply, the market price will rise to indicate that goods are now more scarce. The future increase in prices will therefore begin in the current.

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