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What does the Law of Demand state?
- a)An increase in the price of a commodity leads to an increase in demand.
- b)A decrease in the price of a commodity leads to a decrease in demand.
- c)An increase in the price of a commodity leads to a decrease in demand, and vice versa.
- d)A decrease in the price of a commodity leads to an increase in demand, and vice versa.
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
What does the Law of Demand state?a)An increase in the price of a comm...
The Law of Demand states that an increase in the price of a commodity leads to a decrease in demand, and vice versa. This fundamental economic principle is based on the inverse relationship between the price of a good or service and the quantity demanded by consumers.
- Explanation:
- When the price of a commodity rises, consumers tend to purchase less of that commodity because it becomes relatively more expensive compared to other goods. As a result, the quantity demanded decreases.
- On the other hand, when the price of a commodity falls, consumers are more likely to buy more of that commodity since it is now more affordable. This leads to an increase in the quantity demanded.
- Factors influencing demand:
- Price of the commodity: The most significant factor affecting demand is the price of the commodity itself. As mentioned in the Law of Demand, there is an inverse relationship between price and quantity demanded.
- Income of consumers: Generally, as income levels rise, consumers are willing to purchase more goods and services at any given price. This can lead to an increase in demand.
- Substitution effect: When the price of a commodity increases, consumers may switch to cheaper alternatives, resulting in a decrease in demand for the relatively more expensive commodity.
- Expectations of consumers: Future expectations about prices or income levels can also influence current demand for a commodity.
- Applications:
- The Law of Demand is a key concept in economics and is used by businesses, policymakers, and researchers to understand consumer behavior and market dynamics.
- It helps businesses make pricing decisions, forecast demand for their products, and develop marketing strategies to maximize sales.
- Policymakers use the Law of Demand to analyze the effects of price changes, taxes, subsidies, and other interventions on consumer behavior and market equilibrium.
- Explanation:
- When the price of a commodity rises, consumers tend to purchase less of that commodity because it becomes relatively more expensive compared to other goods. As a result, the quantity demanded decreases.
- On the other hand, when the price of a commodity falls, consumers are more likely to buy more of that commodity since it is now more affordable. This leads to an increase in the quantity demanded.
- Factors influencing demand:
- Price of the commodity: The most significant factor affecting demand is the price of the commodity itself. As mentioned in the Law of Demand, there is an inverse relationship between price and quantity demanded.
- Income of consumers: Generally, as income levels rise, consumers are willing to purchase more goods and services at any given price. This can lead to an increase in demand.
- Substitution effect: When the price of a commodity increases, consumers may switch to cheaper alternatives, resulting in a decrease in demand for the relatively more expensive commodity.
- Expectations of consumers: Future expectations about prices or income levels can also influence current demand for a commodity.
- Applications:
- The Law of Demand is a key concept in economics and is used by businesses, policymakers, and researchers to understand consumer behavior and market dynamics.
- It helps businesses make pricing decisions, forecast demand for their products, and develop marketing strategies to maximize sales.
- Policymakers use the Law of Demand to analyze the effects of price changes, taxes, subsidies, and other interventions on consumer behavior and market equilibrium.
Community Answer
What does the Law of Demand state?a)An increase in the price of a comm...
The Law of Demand states that an increase in the price of a commodity results in a decrease in customer demand for that particular product, and vice versa.
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What does the Law of Demand state?a)An increase in the price of a commodity leads to an increase in demand.b)A decrease in the price of a commodity leads to a decrease in demand.c)An increase in the price of a commodity leads to a decrease in demand, and vice versa.d)A decrease in the price of a commodity leads to an increase in demand, and vice versa.Correct answer is option 'C'. Can you explain this answer?
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