ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -It’s a fundamental economic principle that when supply exceeds demand for a good or service, prices fall. When demand exceeds supply, prices tend to rise. There is an inverse relationship between the supply and prices of goods and services when demand is unchanged.

Detailed explanation-2: -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-3: -The law of supply and demand combines two fundamental economic principles describing how changes in the price of a resource, commodity, or product affect its supply and demand. As the price increases, supply rises while demand declines. Conversely, as the price drops supply constricts while demand grows.

Detailed explanation-4: -Explain all the reasons why a decrease in a product’s price would lead to an increase in purchases. A decrease in the price of a product would result in a rise in purchases since the product is now more affordable, allowing more people to afford it and hence purchase more of it.