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Choose the correct option for the below question :

According to the law of demand, during a given period of time, the quantity of a good demanded

1. Increases as its price rises, ceteris paribus.

2. Increases as its price falls, ceteris paribus.

3. Decreases as its price falls, ceteris paribus.

4. Does not change when price changes.



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Richa Arora
Richa AroraLv10
27 Aug 2020
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Related textbook solutions

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Related questions

1. Which of the following demonstrates the law of demand? 

a. Angela buys less gas for her car at $3.00 per gallon than at $3.50 per gallon.

b. Brenda buys more shirts at $25 each since she got a $1 per hour raise at work.

c. Natasha buys fewer Snickers at $0.85 each since the price of Kit Kats fell to $0.70 each.

d. Darlene sells more shirts since the price of shirts rose.

e. Eleanor buys more bran muffins at $1.50 each than at $2.00 each.

 

2. Assume that Columbia has a comparative advantage in coffee and Mexico has a comparative advantage in peppers. If the two countries specialize and trade according to comparative advantage:

a. Columbia will specialize in coffee production and export coffee.

b. more of each good can be consumed in both countries.

c. individuals in Columbia that produce peppers will be hurt because they will lose jobs.

d. All of the above

e. B and C, only

 

3. Which of the following statements is (are) correct?

(x) Ceteris paribus, the market price of a good will rise if demand increases.

(y) Ceteris paribus, the market price of a good will decrease if supply increases.

(z) Ceteris paribus, the market price of a good must increase if demand increases and supply decreases.

A. (x), (y) and (z)

B. (x) and (y) only

C. (x) and (z) only

D. (y) and (z) only

E. (z) only

 

 

ELASTICITY

We can gain insight by manipulating the price elasticity of the demand equation. With the information provided below, demonstrate what happens in the specific markets.

a) Suppose there is a technological change that allows manufacturers to make Android smartphones much more cheaply. In fact, the retail price falls by 15%, ceteris paribus.

i) If the price elasticity of demand is -0.8, how much does the quantity demanded change?

ii) Statement: the producers are definitely better off. True, false, uncertain, or not enough information? Explain why? (Hint: recall elasticity-total revenue table. The simple way is to construct a numerical example i.e., where the initial price is $100, while the initial quantity is 100 units. )

b) In an alternative scenario, ceteris paribus, suppose there is a new tax on data usage. The income-tax monthly bill increases by 10%.

i) If the price elasticity of demand is -0.45, how much does the quantity demanded change?

ii) Statement: the data plan providers are definitely worse off. True, false, uncertain, or not enough information? Explain why? (Hint: recall elasticity-total revenue table. The simple way is to construct a numerical example i.e., where the initial price is $100, while the initial quantity is 100 units. )

A. I want you to pick 2 of these items, and give me 3 reasons why demand curve would shift for each for the product you pick. I want you also to pick your 2 items and give 3 reasons why the supply curve would shift. So there should be 12 answers!

Please note that the reasons could be straight from headlines, or just simply made up.

B. What does a sale on shirts have to do with the law of demand (as applied to shirts)? A sale on shirts allows us to see that the law of demand holds; that is, ceteris paribus, when the price of shirts falls, the quantity demanded of shirts rises.

C. Describe how each of the following will affect the supply of personal computers:

(a) A rise in wage rates;

(b) An increase in the number of sellers of computers;

(c) A tax placed on production of computers;

(d) A subsidy placed on the production of computers.

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