ECONOMICS (CBSE/UGC NET)

ECONOMICS

DEMAND

Please wait while the activity loads.
If this activity does not load, try refreshing your browser. Also, this page requires javascript. Please visit using a browser with javascript enabled.

If loading fails, click here to try again

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

What will happen in the car market if consumers expect higher prices in the near future?

A	The demand for cars will decrease
B	The demand for cars will increase.
C	The supply of cars will drop.
D	The demand for cars will not change.

Explanation:

Detailed explanation-1: -Expectations:-If consumers expect prices to increase in the future they increase their demand today.

Detailed explanation-2: -Demand is generally considered to slope downward: at higher prices, consumers buy less. The point at which the two curves intersect represents the market-clearing price-the price at which demand and supply are the same. Prices can change for many reasons (technology, consumer preference, weather conditions).

Detailed explanation-3: -Answer: With increase in prices of petrol, the demand curve for cars will shift towards the left ( change in demand) as petrol and cars are complementary goods.

Detailed explanation-4: -One of the demand shifters is buyers’ expectations. If a buyer expects the price of a good to go down in the future, they hold off buying it today, so the demand for that good today decreases. On the other hand, if a buyer expects the price to go up in the future, the demand for the good today increases.

There is 1 question to complete.