ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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airline service
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babysitters
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medical doctors
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midsize cars
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Detailed explanation-1: -The demand for a normal good increases if income increases. The demand for an inferior good decreases if income increases. Expected future income and expected future prices influence demand today. For example, if the price of a computer is expected to fall next month, the demand for computers today decreases.
Detailed explanation-2: -As a price rises, two things occur: There is an increase in quantity supplied (a movement along the supply curve) There is a decrease in quantity demanded (a movement along the demand curve)
Detailed explanation-3: -An increase in price almost always leads to an increase in the quantity supplied of that good or service, while a decrease in price will decrease the quantity supplied.
Detailed explanation-4: -If the price goes up, the quantity demanded goes down (but demand itself stays the same). If the price decreases, quantity demanded increases. This is the Law of Demand. On a graph, an inverse relationship is represented by a downward sloping line from left to right.