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4 votes
Question 2

"When gas prices rise, demand for gas will decrease." This quote is:
Incorrect: price changes quantity demanded, not demand.
O Correct: price and quantity are directly related in the law of demand.
O Incorrect: a price increase will increase quantity supplied, not demand.
Incorrect: a price increase causes an increase in demand, not a decrease.

User Paul Ishak
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1 Answer

17 votes
17 votes

Final answer:

The statement in question is incorrect because it conflates 'demand' with 'quantity demanded'. The law of demand indicates that there is an inverse relationship between price and quantity demanded, meaning that as the price of a good such as gasoline increases, the quantity of gasoline demanded decreases.

Step-by-step explanation:

The student's question relates to a standard concept in Economics called the law of demand. The quote "When gas prices rise, demand for gas will decrease" is incorrect because it confuses demand with quantity demanded. In economic terms, price does not change demand; it changes the quantity demanded. Demand is the entire relationship between the price and the quantity buyers are willing to purchase at each price point under ceteris paribus (all other things being equal) conditions, as represented by the demand curve. A change in price results in a movement along the demand curve, not a shift of the curve itself. However, a change in factors other than the price, such as consumer income or tastes, could lead to a shift in the demand curve. Notably, the law of demand states there is an inverse relationship between price and the quantity demanded, meaning that as prices rise, the quantity demanded tends to fall, and vice versa.


Law of Demand Explained

When considering the price of gasoline, if it increases, consumers typically explore ways to decrease their consumption - they may carpool, use public transportation, or change their travel plans to adapt to the higher costs. This behavior aligns with the law of demand, which is graphically represented by a downward-sloping demand curve. This curve shows the inverse relationship between the price of an item (like gasoline) and the quantity of it that people are willing to buy at those prices.

User Tedy Pranolo
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