True or false? As the price of oranges rises, the demand for oranges falls, ceteris paribus. Explain your answer.
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True or false? As the price of oranges rises, the demand for oranges falls, ceteris paribus. Explain your answer. |
Explanation
Demand refers to the consumer's willingness and the ability to pay for the purchase of varying quantities of a particular good or service at varying prices during a particular period. Demand for the goods changes when any of the factors other than the own price of the good changes.
Quantity demanded of a good, on the other hand, is the actual amount of goods demanded by the consumers at a particular price. Quantity demanded changes only when the price of the good changes. The price of a good varies inversely with the quantity demanded of the good.
Therefore, as the price of good O has increased keeping all other factors constant, only the quantity demanded of the same will decline.
Verified Answer
The statement is false. A rise in the price would cause the quantity demanded to decline and not the demand.
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