ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The way markets respond to a change in price is highly predictable.
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The laws of demand and supply are easy to understand.
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Economists rely on laws as much as any other profession.
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Economic theory rests almost entirely on speculation about how consumers behave.
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Detailed explanation-1: -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-2: -Economists use the term demand to refer to the amount of some good or service consumers are willing and able to purchase at each price. Demand is based on needs and wants-a consumer may be able to differentiate between a need and a want, but from an economist’s perspective they are the same thing.
Detailed explanation-3: -"The greater the amount to be sold, the smaller must be the price at which it is offered in order that it may find purchasers, or in other words, the amount demanded increases with a fall in price and diminishes with a rise in price” (Alfred Marshall).
Detailed explanation-4: -The law of demand is a fundamental principle of economics that states that at a higher price, consumers will demand a lower quantity of a good. Demand is derived from the law of diminishing marginal utility, the fact that consumers use economic goods to satisfy their most urgent needs first.