ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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quantity demanded always increases as price falls.
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changes in price do not influence supply.
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price elasticity of demand does not vary along the demand curve.
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factors affecting demand, other than price, remain constant.
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Detailed explanation-1: -The demand curve is drawn with the assumption of ceteris paribus which means that other factors affecting demand, other than price, remains constant. With this assumption, we are able to study the relationship between the quantity demanded and the price and draw the demand curve.
Detailed explanation-2: -The assumption behind a demand curve or a supply curve is that no relevant economic factors, other than the product’s price, are changing. Economists call this assumption ceteris paribus, a Latin phrase meaning “other things being equal”.
Detailed explanation-3: -Only one i.e., price changes. All others like price of related goods, income, taste and preference remain constant, while drawing an individual’s Demand curve for a commodity.
Detailed explanation-4: -Factors that can shift the demand curve for goods and services, causing a different quantity to be demanded at any given price, include changes in tastes, population, income, prices of substitute or complement goods, and expectations about future conditions and prices.
Detailed explanation-5: -Except for certain less common circumstances, the demand curve slopes down, from left to right, due to the law of demand: that for the majority of goods, the quantity demanded drops as the price rises. Changes in factors besides price and quantity can shift a demand curve to the right or left.