contradictory statements to the? class. The statements were 1) the quantity demanded of a good varies inversely with its price 2) A rise in demand will lead to a rise in price, all other things being equal. Knowing that this instructor could never make an error, how do you explain that both statements are correct?
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Suppose a friend tells you that her Economics instructor made 2 seemingly
- Thread starter Becky B
- Start date
Statement one applies to the demand curve (quaintly vs price), for a fixed prices of other goods and a fixed set preferences, incomes, etc of consumers
Statement 2 applies to effect a change in the preferences of consumers on the demand curve if all else is fixed
The professor may not be wrong by he is sloppy in not making clear the different situations he was talking about. There are many things that effect the price received for a good and by examining how each if them behave if nothing else changes is supposed to help you understand how things work, not confuse you,
Statement 2 applies to effect a change in the preferences of consumers on the demand curve if all else is fixed
The professor may not be wrong by he is sloppy in not making clear the different situations he was talking about. There are many things that effect the price received for a good and by examining how each if them behave if nothing else changes is supposed to help you understand how things work, not confuse you,
I'm a little confused here. They're both technically the same thing.
On a Supply and Demand Curve, or an AD/AS curve, when Price (Demand) contracts or expands, than Quantity will shift with it. If prices rise, than there is a surplus. If prices fall, than there is a shortage.
Demand is essentially Price, because when a high enough level of Demand is warranted, theoretically speaking there is a bidding among the product and as such the prices will rise. Likewise, if Demand is low or non-existant, then the prices will have to fall to attract consumer attention. In all retrospects, an equillibrium is the best option.
On a Supply and Demand Curve, or an AD/AS curve, when Price (Demand) contracts or expands, than Quantity will shift with it. If prices rise, than there is a surplus. If prices fall, than there is a shortage.
Demand is essentially Price, because when a high enough level of Demand is warranted, theoretically speaking there is a bidding among the product and as such the prices will rise. Likewise, if Demand is low or non-existant, then the prices will have to fall to attract consumer attention. In all retrospects, an equillibrium is the best option.
Statement 1 just says that the demand curve is downward sloping. Statement 2 just says that if that same demand curve (or any demand curve for a normal good) shifts outward (an increase in demand), then the new equilibrium price will be higher (all other things being equal). They are not contradictory statements, they are just talking about two different concepts. Statement 1 refers only to the shape of the demand curve, statement 2 refers to the relationship between supply and demand.