ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The additional satisfaction an individual gets from consuming most goods decreases as consumption increases.
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The additional satisfaction an individual gets from consumption decreases as income rises.
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The individual has finite income which is used to attempt to satisfy many wants.
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For most goods the price charged by producers falls as the quantity purchased increases.
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Detailed explanation-1: -Thus, when the quantity of goods is more, the marginal utility of the commodity is less. Thus, the consumer is not willing to pay more price for the commodity and its demand will decline. Also, when the price of the commodity is low, its demand increases. Hence, the demand curve slopes downwards from left to right.
Detailed explanation-2: -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-3: -The first law of demand states that as price increases, less quantity is demanded. This is why the demand curve slopes down to the right. (Because price and quantity move in opposite directions on the demand curve) the price elasticity of demand is always negative.