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Chapter 3: Q. 13 (page 78)

What does a downward-sloping demand curvemean about how buyers in a market will react to a higher

price?

Short Answer

Expert verified

The quantity demanded by the buyers will decrease from QtoQ-1.

Step by step solution

01

Definition

Law of Demand: Keeping other factors constant, there is an inverse relation between price and quantity demanded of a product.

02

Explanation

As we know that, there is an inverse relation between price of a product and its demand by the buyers I.e. As the price falls, buyers will demand more and vice versa. This is shown by the downward sloping demand curve. Therefore, if the market price rises, the buyers will demand less of the commodity because now the product has become expensive.

Consider the following diagram, if the initial price level is P and quantity demanded at price P is Q. Now, if price rises from P to P-1, then as per the law of demand, the quantity demanded by the buyers will decrease from Q to Q-1

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