Determinant of demand Demand increases or decreases?DrawingPopulation increases(Buyers)Population decreases(Buyers)Increase in most peoples'incomeDecrease in mostpeoples' incomePrice of substituteincreasesPrice of substitutedecreasesPrice of complementarygood increasesPrice of complementarygood decreasesProduct becomes apopular fad (change intaste of buyers)Product now out offashion (change in tasteof buyers)There is an expectationthat the price of theproduct will soon fallThere is a fear that theeconomy will go into arecession where manyfirms will fail andunemployment willincrease

Answered: Determinant of demand Demand increases…

Determinant of demand Demand increases or decreases? Drawing Population increases |(Buyers) Population decreases (Buyers) Increase in most peoples income

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter20: Elasticity: Demand And Supply

Section: Chapter Questions

Problem 11E: The price elasticity of the demand for gasoline is -0.02. The price elasticity of demand for...

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Question

100%

Determinant of demand Demand increases or decreases?
Drawing
Population increases
(Buyers)
Population decreases
(Buyers)
Increase in most peoples'
income
Decrease in most
peoples' income
Price of substitute
increases
Price of substitute
decreases
Price of complementary
good increases
Price of complementary
good decreases
Product becomes a
popular fad (change in
taste of buyers)
Product now out of
fashion (change in taste
of buyers)
There is an expectation
that the price of the
product will soon fall
There is a fear that the
economy will go into a
recession where many
firms will fail and
unemployment will
increase

Expert Solution

Step 1

The Law of demand states that there is a negative relationship between the price of a good and its quantity demanded, ceteris paribus. In the Latin language, ceteris paribus means keeping other things constant. That is why when we plot the demand curve against price and quantity demanded, it is downward sloping (negatively sloped). But the law of demand is applicable when the ceteris paribus conditions are satisfied which are:

price of its related goods is constant
the consumer preference and taste is constant
the consumer income
the expectation of price in future
number of buyers

When the ceteris paribus condition hold, there is always movement along the demand curve. A new demand curve is derived when the ceteris paribus conditions are distorted which leads to a shift in the demand curve.

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