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Expansion and contraction in demand are caused by:
- a)Change in income of buyer
- b)Change in taste and preference of buyer
- c)Change in price of the commodity
- d)Change in price of related goods.
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Expansion and contraction in demand are caused by:a)Change in income o...
Change in price of the commodity:
When the price of a commodity increases, demand tends to decrease as consumers are less willing or able to purchase the product at a higher price. This results in a contraction in demand. On the other hand, when the price of a commodity decreases, demand typically increases as consumers are more inclined to purchase the product at a lower price, leading to an expansion in demand.
Factors affecting price changes:
- Changes in production costs
- Changes in government policies or taxes
- Natural disasters affecting supply
- Changes in technology impacting production costs
Impact on demand:
- Inelastic goods: Goods with limited substitutes tend to have less of an impact on demand with price changes.
- Elastic goods: Goods with many substitutes are more likely to see a significant change in demand with price fluctuations.
Price elasticity of demand:
- Elastic demand: Demand changes significantly with price changes.
- Inelastic demand: Demand remains relatively stable regardless of price changes.
Overall impact:
- The price of a commodity plays a crucial role in determining the level of demand in the market. Understanding how price changes affect demand is essential for businesses to make informed decisions regarding pricing strategies and production levels.
When the price of a commodity increases, demand tends to decrease as consumers are less willing or able to purchase the product at a higher price. This results in a contraction in demand. On the other hand, when the price of a commodity decreases, demand typically increases as consumers are more inclined to purchase the product at a lower price, leading to an expansion in demand.
Factors affecting price changes:
- Changes in production costs
- Changes in government policies or taxes
- Natural disasters affecting supply
- Changes in technology impacting production costs
Impact on demand:
- Inelastic goods: Goods with limited substitutes tend to have less of an impact on demand with price changes.
- Elastic goods: Goods with many substitutes are more likely to see a significant change in demand with price fluctuations.
Price elasticity of demand:
- Elastic demand: Demand changes significantly with price changes.
- Inelastic demand: Demand remains relatively stable regardless of price changes.
Overall impact:
- The price of a commodity plays a crucial role in determining the level of demand in the market. Understanding how price changes affect demand is essential for businesses to make informed decisions regarding pricing strategies and production levels.
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Expansion and contraction in demand are caused by:a)Change in income of buyerb)Change in taste and preference of buyerc)Change in price of the commodityd)Change in price of related goods.Correct answer is option 'C'. Can you explain this answer?
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