Describe one of the two reasons given in the textbook to help explain why price and quantity demanded are inversely related
One reason that price and quantity demanded are inversely related is that people substitute lower priced goods for higher priced goods. As the price of one good rises, people will tend to shift away from consuming that good (reducing the quantity demanded), toward one that is relatively lower priced. The second reason that helps to explain this inverse relationship is the law of diminishing marginal utility. The law of diminishing marginal utility states that the marginal utility of equal successive units consumed tends to decline as more units are consumed. Since people tend to receive more marginal utility from the first unit consumed than from the second unit, it makes logical sense that they would be willing to pay more for the first unit than for successive units. In order to encourage the buyer to purchase more units, the seller must lower the price.
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Strong evidence of convergence exists for ________
A) wealthy nations that belong to the Organization for Economic Cooperation and Development B) both rich and poor nations C) sub-Saharan African economies and the economies of North America D) European and Caribbean economies
In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to
A. raise its price above the cooperative price. B. establish competitive price and output levels. C. produce more than its output quota. D. lower both its price and its output.
The _______ model lays out the _______ available to the economy.
A) demand and supply; alternatives B) production possibilities; price alternatives C) production possibilities; alternatives D) demand and supply; prices
If Country A and Country B have the same total output, then the standard of living in these two countries can be different depending on:
A. their respective political systems B. their respective inflation rates C. population size D. their relative geographic size