Under normal conditions, when the price of a good or service decreases the demand?

Question

BlackTom AI · Accepted Answer

The law of demand states that, ceteris paribus (all else equal), a lower price leads consumers to buy more of a good — so quantity demanded rises when price falls.

1) Relevant concepts:
- Law of demand: inverse relationship between price and quantity demanded.
- Ceteris paribus: other factors (income, tastes, price of substitutes) held constant.
- Income and substitution effects: reasons quantity demanded increases when price falls.
- Distinction: “quantity demanded” (movement along demand curve) vs. “demand” (shift of the entire curve).

2) Step-by-step reasoning:
- Start with a given price and quantity demanded on a demand curve.
- If price falls, two effects operate simultaneously:
  a) Substitution effect: the good is relatively cheaper than alternatives, so consumers substitute toward it.
  b) Income effect: the price drop raises consumers’ real purchasing power; for normal goods, they buy more as real income rises.
- Both effects cause a movement down the demand curve to a higher quantity demanded.

3) Numerical illustration (intermediate steps):
- Suppose at price $10 quantity demanded = 5 units.
- Price falls to $8. Due to substitution and income effects, quantity demanded rises to, say, 7 units.
- Change in quantity demanded = 7 − 5 = +2 units (an increase).

4) Why the correct answer is correct:
- The combined substitution and income effects underlie the law of demand; for normal goods, the income effect reinforces substitution, so a price drop increases quantity demanded.

5) Why other options are incorrect:
- “Decreases”: contradicts the inverse relationship; a lower price does not reduce quantity demanded.
- “Remains the same”: would only hold if consumers were completely unresponsive to price (perfectly inelastic demand at that point), which is not the normal-case assumption here.

6) Conclusion:
Under normal conditions (ceteris paribus, for normal goods), a decrease in price causes an increase in quantity demanded. Therefore, the correct answer is “Increases.”

Under normal conditions, when the price of a good or service decreases the demand?单项选择题

类似问题

When Firm A charges $87.50, the quantity demanded is…..

When Firm A charges $100, the quantity demanded is…..

The demand for a good decreases as its price increases. What does this scenario represent?

What does the Law of Demand state?

The most likely explanation for an expansion in demand for milk would be?

Question 7.30 Choose the correct answerThe diagram depicts the demand curve of a product. Assume that there are 100 potential buyers who can choose to purchase one unit each. Based on this graph, read the following statements and select the correct one.

The fact that price and quantity demanded are related negatively illustrates the

Imagine that the price of apples rises. How is demand affected?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单