What is the law of demand? Give two examples of how you have observed the law of
ID: 1141203 • Letter: W
Question
What is the law of demand? Give two examples of how you have observed the law of demand at work in the “real world.” How is the law of demand related to the demand curve?
(Demand) If chocolate is found to have positive health benefits, would this lead to a shift in the demand curve or a movement along the demand curve?
(Changes in Supply) What kinds of changes in underlying conditions can cause the supply curve to shift? Give 2 examples and explain the direction in which the curve shifts.
(Determinants of Price Elasticity) What factors help determine the price elasticity of demand? What factors help determine the price elasticity of supply?
(Law of Diminishing Marginal Utility) Some restaurants offer “all you can eat” meals. How is this practice related to diminishing marginal utility? What restrictions must the restaurant impose on the customer in order to make a profit?
Explanation / Answer
The law of demand says that there is opposite relationship between price and quantity demanded and other factors affecting demand are constant.
Example; when price of ice-cream increase, the quantity demand for it decreases.
when price of movie ticket increase, the quantity demand for it decreases.
Both the demand curve and law of demand shows the inverse relationship between price and quantity demanded.
If chocolate is found to have positive health benefits, this would lead to a rightward shift in the demand curve.
Change in the tax rate on the goods produced.
change in the inputs price.
Both these condition can cause the supply curve to shift.
With the decrease in the tax rate, the profitability of the producer increases, so they produce more, so the supply curve shifts rightward.
With the decrease in the inputs price, the profitability of the producer increases, so they produce more, so the supply curve shifts rightward.
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