Wednesday, December 26, 2012

Change in Demand

True or False
: According to the laws of supply and demand, when the price of a good rises, less of that good will be sold.

The correct answer is "False".  The reason that the price increased was because of a change in demand.  When the demand curve shifts to the right, the rice raises and more of the good is sold, not less.

A change in demand could happen because of a change in tastes and preferences, an increase in income, future expectations of a higher price, an increase in the number of buyers, and a change in the price of a related good.

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