ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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supply curves are upward sloping
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the higher price means that real incomes have risen
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consumers will substitute other products for the one whose price has risen
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consumers substitute relatively high-priced for relatively low-priced products
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Detailed explanation-1: -The substitution effect is the decrease in sales for a product that can be attributed to consumers switching to cheaper alternatives when its price rises.
Detailed explanation-2: -The Law of Demand Because buyers have finite resources, their spending on a given product or commodity is limited as well, so higher prices reduce the quantity demanded. Conversely, demand rises as the product becomes more affordable. As a result, demand curves slope downward from left to right, as in the chart below.
Detailed explanation-3: -Price is dependent on the interaction between demand and supply components of a market. Demand and supply represent the willingness of consumers and producers to engage in buying and selling. An exchange of a product takes place when buyers and sellers can agree upon a price.
Detailed explanation-4: -As we can see on the demand graph, there is an inverse relationship between price and quantity demanded. Economists call this the Law of Demand. If the price goes up, the quantity demanded goes down (but demand itself stays the same). If the price decreases, quantity demanded increases.
Detailed explanation-5: -A. An increase in the price of a substitute is correct because the substitute goods have a positive price elasticity of demand. Therefore, when the price of substitute goods rises, it causes the demand to rise which can be depicted by a rightward shift in the demand curve. B.