Question

The accompanying graph depicts a hypothetical market for salt. Suppose the price of salt increases. What will happen to the quantity demanded of salt?

1) The quantity demanded of salt will increase
2) The quantity demanded of salt will decrease
3) The quantity demanded of salt will remain unchanged
4) Cannot be determined without additional information

Answer 1

The correct answer is 2. An increase in the price of salt will decrease the quantity demanded of salt, adhering to the law of demand that states there is an inverse relationship between price and quantity demanded.

Step-by-step explanation:

The law of demand states that a higher price will lead to a lower quantity demanded. Therefore, if the price of salt increases, the quantity demanded of salt will decrease. This is because consumers will be less willing and able to purchase salt at a higher price.

When the price of salt increases, according to the law of demand, the quantity demanded of salt will decrease. This inverse relationship is a fundamental concept in economics stating that, ceteris paribus (other factors being equal), as prices go up, the quantity demanded goes down. This holds true for salt along with most other goods and services, as consumers react to higher prices by reducing consumption. For example, if gasoline prices rise, people will find ways to lower usage like carpooling or taking public transport more frequently. Similarly, an increase in the price of salt would lead consumers to either use less salt or seek cheaper alternatives, contributing to a fall in the quantity demanded.