Give three explanations for the law of demand:
Please provide the best answer for the statement.
First, it is explained by common sense. People tend to buy more of a product at a lower price than at a higher price. Second, there is diminishing marginal utility: a decrease in satisfaction that results with an increase in the amounts of a good or service. The second unit of a good yields less satisfaction (or utility) than the first. Third, there are income and substitution effects. With an income effect, a lower price increases the purchasing power of money income, enabling you to buy more at lower price. With a substitution effect a lower price gives an incentive to substitute the lower-priced good for a now relatively high-priced good.
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As aggregate demand shifts right along the aggregate supply curve,
a. inflation and unemployment are higher. b. inflation is higher and unemployment is lower. c. unemployment is higher and inflation is lower. d. unemployment and inflation are lower.
What is the profit maximizing (loss minimizing) quantity for the perfectly competitive firm to produce?
Why would a firm keep producing even though it is losing money?
a. If the price is greater than the minimum average total cost, the firm will cover all its variable costs and lower its losses by paying off some of its fixed costs. b. If the price is less than the minimum average variable cost, the firm will cover all its variable costs and pay off some of its fixed costs. c. If the price is greater than the minimum average variable cost, the firm will cover all its variable costs and pay off some of its fixed costs. d. If the price is less than the minimum average variable cost, the firm will cover all its variable costs and pay off some of its fixed costs.
During the financial crisis of 2007-2009 the interest rate spread on mortgage-backed securities over Treasury bills
a. increased tremendously. b. increased moderately. c. decreased moderately. d. decreased tremendously.