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Understanding the Answer
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Answer
When a price goes up, most people buy less of the item because it costs more, so the quantity demanded usually falls. However, this rule is not absolute. Some products, like high‑end watches or luxury cars, are seen as better or more desirable when they are expensive, so people may actually buy more as the price rises. In other cases, a price hike can signal better quality or scarcity, encouraging more purchases. Thus, while price increases often lower demand, other factors can cause the opposite effect.
Detailed Explanation
The law of demand says price and quantity demanded move opposite ways, but other things can change that. Other options are incorrect because The misconception is that price changes always reduce demand.
Key Concepts
Demand
Supply
Price Elasticity
Topic
Demand and Supply Basics
Difficulty
easy level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1What happens to the market equilibrium price if there is an increase in demand while supply remains constant?
easyEconomics
Practice
2
Question 2What happens to the equilibrium price of a good when there is a decrease in demand while supply remains constant?
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Practice
3
Question 3How does an increase in the price of a good affect its market equilibrium when the demand for that good is inelastic?
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Practice
4
Question 4If consumers experience an increase in income, leading to a rise in their purchasing power, which of the following scenarios best describes the impact on the demand curve for a normal good?
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Practice
5
Question 5If the demand for a good is perfectly inelastic, which of the following statements is true regarding price changes?
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Practice
6
Question 6In the context of demand and supply, the principle that states that as the price of a good increases, the quantity demanded decreases is known as the law of ______.
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Practice
7
Question 7If the demand for a product increases while supply remains constant, what is likely to happen to the market equilibrium price?
easyEconomics
Practice
8
Question 8If the price of a product decreases and the quantity demanded increases significantly, what could be a primary reason for this scenario occurring?
easyEconomics
Practice
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