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Chapter 3: Q. 13 (page 78)

What does a downward-sloping demand curvemean about how buyers in a market will react to a higher

price?

Short Answer

Expert verified

The quantity demanded by the buyers will decrease from QtoQ-1.

Step by step solution

01

Definition

Law of Demand: Keeping other factors constant, there is an inverse relation between price and quantity demanded of a product.

02

Explanation

As we know that, there is an inverse relation between price of a product and its demand by the buyers I.e. As the price falls, buyers will demand more and vice versa. This is shown by the downward sloping demand curve. Therefore, if the market price rises, the buyers will demand less of the commodity because now the product has become expensive.

Consider the following diagram, if the initial price level is P and quantity demanded at price P is Q. Now, if price rises from P to P-1, then as per the law of demand, the quantity demanded by the buyers will decrease from Q to Q-1

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Most popular questions from this chapter

  1. Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary.
    a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.
    b. The winter is exceptionally cold.
    C. A major discovery of new oil is made off the coast of Norway.
    d. The economies of some major oil-using nations, like Japan, slow down.
    e. A war in the Middle East disrupts oil-pumping schedules.
    f. Landlords install additional insulation in buildings.
    g. The price of solar energy falls dramatically.
    h. Chemical companies invent a new, popular kind of plastic made from oil.

Does a price ceiling attempt to make a price higher

or lower?

Name some factors that can cause a shift in the

demand curve in markets for goods and services.

What term would an economist use to describe

what happens when a shopper gets a “good deal” on a

product?

Suppose both of these events took place at the same time. Combine your analyses of the impacts of the iPod and the tariff reduction to determine the likely impact on the equilibrium price and quantity of Sony Walkman-type products. Show your answer graphically.
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