Please Login to view full dashboard.

Price and quantity demanded

Author : Admin

0  
Topic updated on 02/14/2019 09:37am

Analyze the inverse relationship between price and quantity demanded when other factors remain constant at a certain time.

Analyze the law of demand in the following ways.

  • Demand schedule
  • Demand curve
  • Demand equation

 

  • When other factors remain constant and at a certain period of time the table which show the quantities demanded at various price is called demand schedule., the list of number are called demand schedule
  • At a certain time when other factors remain constant, the curve which combined all the points of quantities demanded at various prices of the considering good is the demand curve.
  • When other factors remain constant, the equation which explains the inverse relationship between the price of considered goods and the quantity demanded is the demand equation.
  • When other factors remain constant, the demand curve has a negative slope due to the inverse relationship between price of the good and quantity demanded.

 

The three determinants of the inverse relationship between the price of the good and quantity demanded, are

  • Income effect
  • Substitution effect
  • The change in real income of individuals as the change in the price of goods at a
    certain time, when other factors remain constant is known as income effect.

The substitution effect could be explained as below.

  • Assume that the other factors except price of the good remain constant
    (including the price of substitution goods)
  • In this type of situation, the quantity demanded of that good would be increased or decreased on the change of comparative price that resulted from increase or decrease of the price of the considered good.
  • This is the substitution effect. (Explain with an example).
  • As the marginal utility decreases when consumption increases, the consumers are
    willing to consume more goods only if they are charged less. Therefore the demand
    increases when the price decreases.

Contradictions of the law of demand.

  • Giffen goods
  • Prestigious consumption
  • Goods which represent the quality by price.
RATE CONTENT 0, 0
QBANK (0 QUESTIONS)
Comments Hide Comments(0)

Leave a Reply

Astan Publications
  • - This Questions is not available for FREE Users
  • - Please call us to become Premium Member
  • - Access to over 2000+ Questions & Answers
  • - Online active text through our Qbank