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Theory of Demand and Supply - 1 Video Lecture - Crash Course for CA Foundation
FAQs on Theory of Demand and Supply - 1
| 1. What is the Law of Demand? |  |
Ans. The Law of Demand states that, all else being equal, as the price of a good or service decreases, the quantity demanded by consumers increases, and conversely, as the price increases, the quantity demanded decreases. This relationship between price and quantity demanded is typically represented by a downward-sloping demand curve.
| 2. What factors can affect the demand for a product? | |
Ans. Several factors can affect the demand for a product, including consumer income, preferences and tastes, the price of related goods (substitutes and complements), consumer expectations about future prices, and the number of buyers in the market. Changes in any of these factors can lead to shifts in the demand curve.
| 3. How do substitutes and complements influence demand? | |
Ans. Substitutes are goods that can replace each other; when the price of a substitute rises, the demand for the original good increases. Complements are goods that are used together; when the price of a complement rises, the demand for the original good decreases. These relationships illustrate how interconnected consumer preferences are in the market.
| 4. What is meant by the term 'shift in demand'? | |
Ans. A shift in demand refers to a change in the quantity demanded at every price level, resulting in a new demand curve. This can occur due to changes in consumer preferences, income levels, or the prices of related goods. An outward shift indicates an increase in demand, while an inward shift indicates a decrease.
| 5. How does the concept of elasticity relate to the Law of Demand? | |
Ans. Elasticity measures how responsive the quantity demanded of a good is to changes in price. If a product has elastic demand, a small change in price will result in a larger change in quantity demanded. Conversely, inelastic demand means that quantity demanded is not very responsive to price changes. Understanding elasticity helps businesses and economists predict how changes in price will affect overall demand.
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Apr 11, 2026 Last updated
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