Why do prices increase when demand for a product is high? Companies know they can make more money by selling fewer products at higher prices. Companies know that people will be willing to spend more to get an in-demand product. Companies take advantage of the demand to make people spend more money on excess products. Companies know they can stop production and still make money on sales.

Prices increase when demand is high because companies know that people will be willing to spend more to get in-demand products.

Prices generally increase with higher demand for goods because the higher demand creates pressure for the supply to meet up.

Manufacturing companies can either increase their production to meet up with demand at the same price or capitalize on the situation to make more money by increasing the price without increasing the supply.

Since there is a buying pressure on the product in the market already, people would still be open to buying even at higher prices.

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Companies know that people will be willing to spend more to get an in-demand product.

Explanation:

When a product is really in demand, many customers are willing to part with more money order to purchase the product, as a result of that, many companies may take advantage of the increasing demand for the product to hike it's price.

Hence, the increase in price may not really have a negative impact on the quantity demanded because the demand for the product is high and customers are willing to spend more money in order to purchase an in-demand product, hence the answer above.