1. The \"law of demand\" implies that A) as prices fall, demand increases B) as
ID: 1135150 • Letter: 1
Question
1. The "law of demand" implies that A) as prices fall, demand increases B) as prices rise, demand increases C) as prices fall, quantity demanded increases D) as prices rise, qua ntity demanded increases Number of DVDs rented per week Figure A 2. Refer to Figure A. The number of DVDs Isabel rents per week increases from 4 to 7. This is caused by A) an increase in income if DVDs are a normal good. B) a decrease in the price of popcorn, which is a complement to DVDs C) a decrease in the rental price of DVDs D) either A or BExplanation / Answer
1. The law of demand states that there is an inverse relationship between price and quantity demanded, i.e. as prices fall, quantity demanded increases or, when prices rise, quantity demanded falls.
Answer- option C
2. Figure A shows that there is a movement along the demand curve which only takes place when price of that product changes. All other factors such as increase in income, Change in price of complementary or substitute goods etc. are demand shifters and will shift the demand curve.
If the no. of DVDs IsabeI rents increases (that is quantity demanded increases) then there must be a decrease in rental price of DVDs.
Answer- option C
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