If a company raises the price of its product and observes a significant decrease in quantity demanded, what is the most likely underlying cause of this outcome?

When a company raises the price of its product and sees a big drop in how much people want to buy, it usually means that the demand for that product is elastic. This means that consumers are sensitive to price changes; if the price goes up, they will buy less or look for cheaper alternatives. For example, if a soda company increases the price of its drinks, many people might decide to drink water or a different brand instead. The key idea here is that when prices rise significantly, it can lead to a noticeable decrease in sales because consumers have options and are willing to change their choices. Understanding this helps businesses make better pricing decisions to keep customers happy.