“In the past five years the average price of our Chevrolets has risen

“In the past five years the average price of our Chevrolets has risen about 6 percent a year, and each year we have sold 10 percent more cars than the previous year.” How can this car dealer sell more cars as the price of the cars increases?

What will be an ideal response?

ANSWER

All else constant, an increase in demand will lead to both an increase in price and an increase in the quantity of cars sold. Alternatively, so long as demand increases by more than supply decreases, price and quantity exchanged will both increase.