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When total demand for a commodity whose price has fallen increase?
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When total demand for a commodity whose price has fallen increase?



Factors affecting total demand for a commodity when its price falls:

Substitution Effect:
- When the price of a commodity falls, consumers tend to switch from relatively more expensive alternatives to the cheaper commodity. This leads to an increase in demand for the cheaper commodity.

Income Effect:
- As the price of a commodity decreases, consumers' purchasing power increases. This increase in real income leads to a higher demand for the commodity.

Expectations of Future Price:
- If consumers anticipate that the price of the commodity will rise in the future, they may increase their current demand to take advantage of the lower price.

Availability of Credit:
- Lower prices may encourage consumers to take advantage of credit to purchase more of the commodity, further increasing demand.

Advertising and Promotion:
- Companies may increase advertising and promotional activities for the commodity with the reduced price, attracting more consumers and boosting demand.
Overall, when the price of a commodity falls, the total demand for it tends to increase due to a combination of substitution effect, income effect, expectations of future price, availability of credit, and advertising and promotion strategies. This increase in demand can lead to higher sales and potentially increased profitability for the producers of the commodity.
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In a poor country like India, as income rises people first concentrate on increasing their consumption of what they regard as basic or more essential consumer goods. For the poor, these goods would primarily include cereals and for people at successive levels of higher income protective foods, simple non-food consumer goods, more modern, better quality non-food consumer goods and simple consumer durables, better quality consumer goods, and so on. When the demand for basic and more essential consumer goods is more or less met, demand for the next higher level of consumer goods begins to impinge on consumer decision making and their consumption increases. There is thus a hierarchy of income levels and a hierarchy of consumer goods. As incomes rise and one approaches the turning point referred to, there is an upward movement along the hierarchy in the demand for consumer goods which exhibits itself in a relative increase in the demand for these goods. If one examines the past consumption behaviour of households in India, one finds confirmation of the proposition just made. Until the mid seventies one notices a rise in the proportion of consumption expenditure on cereals, and thereafter, a steady decline reflecting a progressive increase in the relative expenditure on non-cereal or protective foods. About the same time the rising trend in the share of food in total consumption expenditure also begins to decline, raising the proportion of expenditure on non-food consumer goods. Simultaneously one also notices a sharper rise in the proportion of expenditure on consumer durables. Thus, what one sees is an upward movement in consumer demand along the hierarchy of consumer goods which amounts to a major change in consumer behaviour.Prices of protective food have risen because

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When total demand for a commodity whose price has fallen increase?
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