When the price of a certain product increases, its demand decreases

Question

When the price of a certain product increases, its demand decreases. The decrease in demand leads to a corresponding decrease in consumer confidence in that product as well. However, when the income of consumers is on the rise, it opposes the reduction in demand.

If the statements above are true, which of the following is also true regarding this product?

(A) When the income of consumers and the price of the product both increase, customer confidence will not go down.

(B) The rise in consumer income causes a rise in consumer confidence.

(C) By controlling the price of the product, consumer confidence in it can be maintained.

(D) During a recession, when the demand is very low, consumer confidence is not linked to the price anymore.

(E) Consumer confidence in the product likely decreases more without an increase in consumers' income than with it

Nishantanand1992 · Answer

Can anyone please explain why E is a better option than Option C ?

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happypuppy · Answer

(C) By controlling the price of the product, consumer confidence in it can be maintained.

Here, we can't say that consumer confidence is function of just the price of the product but 'income of consumers' also has impact on consumer confidence if you consider the indirect relation. 
Say, 
We keep the price fixed to 100 AND consumer income falls to 10
This will lead to the `demand decrease` and that will lead to lower confidence.

Whereas, (E) Consumer confidence in the product likely decreases more without an increase in consumers' income than with it
is a better choice and correct one.

Considering same case as above. 
Case 1:
We increase the price to 200 from 100 AND consumer income increases to 10
This will lead to the demand be same as or even more as buying capacity increase, hence the increase in confidence.

Case 2:
We increase the price to 200 from 100 AND consumer income remains same ( or as in (E) without an increase in consumers' income)
This will lead to the `demand decrease` due to higher price and low buying capacity. Also that will lead to lower confidence.

vdhanuka · Answer

why not a ....a is also true
because price increse ...demant decrease 
but income also increases hence the decreased demand with be cancelled out and confidence remains the same

0ExtraTerrestrial · Answer

The consumer confidence in a product can also go down due to rise of other products or similarly non- controllable factors.

azulonx · Answer

Because the word “likely” in option E, as opposed to the word “will go down”.

Reading the passage it seems that Option A will 99.9% happen, however as we explicitly dont have enough true statements to make that connection, option E is better, which also has the same support but uses the word “likely”

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aryanrgupta · Answer

Product price affects the demand of that product: a higher price = lower demand.

Demand of product affects the consumers confidence: a lower demand(because of a higher price) = lower confidence.

So, price confidence decreases as the price increases.

Hence option  (E)

Why not option  (C) ?:  By controlling the price of the product, consumer confidence in it can be maintained.

The price of the product can be controlled but what if the consumers income does not increase? would he buy the product?

The answer is  NO .

Hence, the correct answer should be  (E)

When the price of a certain product increases, its demand decreases

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When the price of a certain product increases, its demand decreases

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