Impact of Food Price Increase on Demand and Economic Growth

In your opinion, has demand increased or decreased after the increase in food price?

Build your explanation with current business scenarios.

Final Answer:

After an increase in food prices, the demand for the product is likely to decrease.

Explanation:

After an increase in food prices, the demand for the product is likely to decrease. When the price of a product increases, consumers may choose to purchase less of that product or look for cheaper alternatives. In this scenario, the increase in the cost of ingredients has led to a price hike in Gardenia Bakeries' products. As a result, some consumers may choose to buy less bread or switch to cheaper brands.

Inflation can lead to recession in a country because it erodes the purchasing power of consumers. When prices rise, consumers may cut back on spending, which can ultimately lead to a decrease in overall economic activity. For example, if the prices of essential goods like bread increase significantly, consumers may have less money left to spend on other goods and services, causing a decline in demand and affecting businesses and the economy as a whole.

There are several ways the government can increase economic growth in a country. One way is through fiscal policy, where the government uses its budget to stimulate the economy. For instance, the government can increase spending on infrastructure projects, which creates jobs and boosts economic activity. Another way is through monetary policy, where the government adjusts interest rates or takes other measures to influence the money supply and borrowing costs. Lastly, the government can promote entrepreneurship and innovation by providing support to small businesses and startups through funding programs or tax incentives.