Multiple Choice
In microeconomics, the demand curve for a typical (normal) good has which of the following slopes in a price–quantity graph (price on the vertical axis, quantity on the horizontal axis)?
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3. The Market Forces of Supply and Demand
The Demand Curve
Multiple Choice
According to the law of demand, what happens to the quantity demanded of a good when its price rises, holding all other factors constant?
A
Price and quantity demanded are unrelated, ceteris paribus.
B
Quantity demanded increases as price rises, ceteris paribus.
C
Quantity demanded stays constant as price rises, ceteris paribus.
D
Quantity demanded decreases as price rises, ceteris paribus.
Verified step by step guidance1
Understand the law of demand: It states that, ceteris paribus (holding all other factors constant), there is an inverse relationship between the price of a good and the quantity demanded.
Identify the key variables: Price (P) and Quantity Demanded (Qd). According to the law, when price increases, quantity demanded decreases, and vice versa.
Express this relationship mathematically as a downward-sloping demand curve, which can be represented as \(Q_d = f(P)\) where \(\frac{\partial Q_d}{\partial P} < 0\).
Interpret the meaning of ceteris paribus: This means that the only factor changing is the price, while other determinants of demand (like income, tastes, prices of related goods) remain constant.
Conclude that when the price of a good rises, the quantity demanded falls, illustrating the negative slope of the demand curve.
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