Why Do Companies Raise Prices When Demand Increases?

Imagine you're selling lemonade on a hot day. More people want to buy it, so you raise the price because you know they'll still buy it, and you’ll make more money. That’s what happens in real life too when companies see demand go up.

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Examples

A popular ice cream shop raises its prices during the summer because more people want it.
The price of a new phone goes up after it's released, even though there are still plenty of people who want it.
Tickets to a concert become more expensive when they're sold out.

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Categories: Economics · price· demand· supply and demand· economics· business strategy