Price and Demand Weakening

The impact of rising prices can be described in two ways, namely the substitution effect and the income effect. The most extreme impact is the loss of demand, or demand destruction, due to the substitution effect and income effect, which makes consumer goods no longer unaffordable.

The increase in the price of an item has a limit. If it rises above the ability to pay, the customer will stop buying and switch completely to another alternative. This is a mechanism that prevents price increases from developing into hyperinflation.