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Demand Curve

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Suppose a friend tells you that her Economics instructor made two seemingly contradictory statements to the class. The statements were 1. "The quantity demanded of a good varies inversely with its price" and 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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Solution Summary

Solution evaluates two statements with the help of suitable concepts in microeconomics.

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Solution:

Statement 1: "The quantity demanded of a good varies inversely with its price"
Statement 2: "A rise in demand will lead to a rise in price, all other things being equal."

Statement 1 refers to movement along the demand curve. Demand curve is negatively slopped. If the price ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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