ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an increase in the factors employed in the industry
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an increase in producer’s revenue
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a reduction in the quantity demanded
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a reduction in the demand for substitutes
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Detailed explanation-1: -A second reason the aggregate demand curve slopes downward lies in the relationship between interest rates and investment. A lower price level lowers the demand for money, because less money is required to buy a given quantity of goods.
Detailed explanation-2: -There are three basic reasons for the downward sloping aggregate demand curve. These are Pigou’s wealth effect, Keynes’s interest-rate effect, and Mundell-Fleming’s exchange-rate effect.
Detailed explanation-3: -The slope of the demand curve (downward to the right) indicates that a greater quantity will be demanded when the price is lower. On the other hand, the slope of the supply curve (upward to the right) tells us that as the price goes up, producers are willing to produce more goods.
Detailed explanation-4: -The inverse relationship between price and quantity demanded is indicated by a downward sloping demand curve. When market prices are higher, customers reduce their demand for goods and buy less, resulting in a downward sloping demand curve.