A local bakery notices that when they increase the price of their bread, the quantity sold decreases significantly, but they also find that when the price of cookies decreases, more cookies are sold. How can the bakery use the concepts of demand and supply to adjust their pricing strategy?

The bakery can use the concepts of demand and supply to adjust its pricing strategy by understanding how price changes affect sales. When they increase the price of bread and notice that fewer customers buy it, this shows that the demand for bread is sensitive to price; people buy less when it costs more. On the other hand, when the price of cookies decreases and sales increase, it indicates that lowering the price makes cookies more appealing to customers, suggesting they have a higher demand at that lower price. To maximize sales and profit, the bakery could consider lowering the price of bread to attract more customers or find a balance in cookie pricing to maintain higher sales without losing too much profit. For example, if they lower bread prices slightly, they might sell enough extra loaves to make up for the lower price.