Another round of price increases on household products like Gillette razors, Dawn dish soap and Swiffer dusters bolstered Procter & Gamble's bottom line last quarter, the company said on Friday, a sign that stubborn inflation may linger as companies defend their profit margins. Procter & Gamble, a consumer goods bellwether, said its profit grew in the first three months of the year after it raised prices 10 percent across its brands. That rise was the company's second consecutive quarter of double-digit increases. Its profit margin expanded in the quarter, with price increases more than offsetting the rise in what it paid for raw materials.

Revenue rose 4 percent last quarter from a year earlier, even as sales volumes the number of rolls of Charmin toilet paper and boxes of Tide detergent fell 3 percent as consumers traded down to less expensive alternatives or bought less. In other words, Procter & Gamble made more money even though it sold fewer products. Sales volumes at the company have declined in the past four quarters.

Provide an economic explanation for why P&G's profit has gone up even though sales have fallen after the price increase. Please bring both demand and supply side considerations into your answer.

Answer rating: 100% (QA)

Economic Explanation for PGs Increased Profit Despite Falling Sales Procter Gambles PG rising profit despite falling sales can be attributed to a comb... View the full answer