ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It has substitutes.
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It is a necessity.
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It is perfectly elastic in demand.
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It is in fixed supply.
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Detailed explanation-1: -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.
Detailed explanation-2: -Due to the decrease in income of the consumer, the purchasing power of the consumer will also decrease. So the demand for the product in the market will also decrease. Resultantly demand will change even if the price and supply of the product remain the same. This is called a decrease in demand.
Detailed explanation-3: -Increased prices typically result in lower demand, and demand increases generally lead to increased supply. However, the supply of different products responds to demand differently, with some products’ demand being less sensitive to prices than others.
Detailed explanation-4: -The substitution effect refers to the change in demand for a good as a result of a change in the relative price of the good compared to that of other substitute goods. For example, when the price of a good rises, it becomes more expensive relative to other goods in the market.