Price escalation causes a decrease in demand for goods and services by a company. It also leads to increased profit margins due to the huge difference between the production cost and the selling price of a commodity. An increase in the cost of a commodity has a detrimental effect on suppliers who are stuck with a large stock in storage due to decreased demand for the goods.
It also interferes with the economies of large scale due to the minimized sales made. This phenomenon positively impacts the brand’s appearance as it attracts new customers who associate high prices with appropriate quality, making the commodity a luxury product.
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