Thursday, December 27, 2012

Price of Eggs

True or False:
A sharp rise in the price of eggs would be unlikely to last very long; after all, the rise in price would lead to a fall in demand, and this fall in demand would then cause the price to fall.

False.  The question tries to confuse the learner with the difference between the change in quantity demanded with a change in demand.  The question reads if the price of eggs increases, which is a change in quantity demanded.  This is a move from A to B.  If there is a fall in demand, then the blue line, demand curve, would shift to the left but the price would still remain at $7.  

I challenge you to find other examples where the media confuses a change in demand with a change in quantity demanded.

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