Microeconomics: Supply, demand and market equilibrium — Demand and the Demand Curve
The law of demand, why the demand curve slopes down, and what shifts it versus what only moves along it.
Microeconomics · 23 questions
Try 3 questions
1. What does the law of demand state, holding everything else constant?
- A higher price lowers the quantity demanded
- A higher price raises the quantity demanded
- Price has no effect on quantity demanded
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Answer: A higher price lowers the quantity demanded
When only the good's own price changes, buyers purchase less as it rises and more as it falls, so demand curves slope downward.
2. What does the Latin phrase 'ceteris paribus' mean in demand analysis?
- All other things held equal
- Prices are set by the market
- Buyers act rationally
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Answer: All other things held equal
Economists isolate the effect of one variable, like price, by assuming income, tastes and other prices stay fixed.
3. The price of mangoes falls and people buy more mangoes. How is this shown on the mango demand graph?
- The demand curve becomes steeper
- The demand curve shifts to the right
- A movement along the same demand curve
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Answer: A movement along the same demand curve
A change in the good's own price moves buyers along a fixed curve; only changes in other factors shift the curve itself.
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