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The law of demand states that

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The law of demand states that  [#permalink]

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New post Updated on: 02 Oct 2018, 04:11
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The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will consume that good. In other words, the higher the price, the lower the quantity demanded. This principle is illustrated when_____________ .

(A) Company A has a monopoly over the widget market so an increase in widget prices has little effect on the quantity demanded

(B) a manufacturer of luxury cars noticed that its customer base is relatively unresponsive to changes in price

(C) a city experiences an increase in both gasoline prices and the number of people taking public transportation

(D) an increase in the number of computer retailers led to a decrease in the average price of computers

(E) a reduction in the price of oranges from $2 per pound to $1 per pound results in 75 pounds of oranges being sold as opposed to 50 pounds

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Originally posted by apoorv601 on 05 Jun 2015, 03:15.
Last edited by Skywalker18 on 02 Oct 2018, 04:11, edited 1 time in total.
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Re: The law of demand states that  [#permalink]

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New post 20 Jun 2015, 10:48
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apoorv601 wrote:
The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will consume that good. In other words, the higher the price, the lower the quantity demanded.


Price Increase = Less consumption/demand. - Law of Demand.

This principle is illustrated when_____________ .

(A) Company A has a monopoly over the widget market so an increase in widget prices has little effect on the quantity demanded - Law of Demand is not effective here.

(B) a manufacturer of luxury cars noticed that its customer base is relatively unresponsive to changes in price - Law of Demand is not effective here.

(C) a city experiences an increase in both gasoline prices and the number of people taking public transportation

Apparently it seems -

Rise in gasoline Prices-----> People feel the pinch of rise in price -----> Travel by public transport.

But think a bit further , if Price of Gasoline increases won't it have the same effect on public transport vehicles ?

For this to be true we have to assume -

1. Public Transport Vehicles don't run on gasoline
2.There has been no rise in Price of the Fuel which is used for driving Public Transport Vehicles.

This is far fetching conclusion, hence Incorrect.

(D) an increase in the number of computer retailers led to a decrease in the average price of computers - Law of Demand is not effective here.

(E) a reduction in the price of oranges from $2 per pound to $1 per pound results in 75 pounds of oranges being sold as opposed to 50 pounds

Decrease in Price = Increase in Quantity Demanded.

IMHO (E) since it looks better than the rest of the answer choices...

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Re: The law of demand states that  [#permalink]

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New post 19 Jun 2015, 07:35
apoorv601 wrote:
The law of demand states that, if all other factors remain equal, the higher the
price of a good, the less people will consume that good. In other words, the
higher the price, the lower the quantity demanded. This principle is illustrated
when_____________ .


(C) a city experiences an increase in both gasoline prices and the number of
people taking public transportation

(E) a reduction in the price of oranges from $2 per pound to $1 per pound results
in 75 pounds of oranges being sold as opposed to 50 pounds


Surprised! What's wrong with C?
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Re: The law of demand states that  [#permalink]

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New post 21 Jun 2015, 09:35
apoorv601 wrote:
The law of demand states that, if all other factors remain equal, the higher the
price of a good, the less people will consume that good. In other words, the
higher the price, the lower the quantity demanded. This principle is illustrated
when_____________ .

(A) Company A has a monopoly over the widget market so an increase in widget
prices has little effect on the quantity demanded


(B) a manufacturer of luxury cars noticed that its customer base is relatively
unresponsive to changes in price


(C) a city experiences an increase in both gasoline prices and the number of
people taking public transportation


(D) an increase in the number of computer retailers led to a decrease in the
average price of computers

(E) a reduction in the price of oranges from $2 per pound to $1 per pound results
in 75 pounds of oranges being sold as opposed to 50 pounds


Trend Increase in price, Decrease in demand. Only relation is Price to Demand.
Invalid relation is reverse relations, that is demand to price.

POE.
A) Company A has a monopoly over the widget market so an increase in widget
prices has little effect on the quantity demanded
Incorrect - It does not follow trend

(B) a manufacturer of luxury cars noticed that its customer base is relatively
unresponsive to changes in price
Incorrect - It does not follow trend

(C) a city experiences an increase in both gasoline prices and the number of
people taking public transportation
Its seems to follow the trend. Let's Keep it aside till last option.


(D) an increase in the number of computer retailers led to a decrease in the
average price of computers
Relation of supply to Cost has not been discussed.

(E) a reduction in the price of oranges from $2 per pound to $1 per pound results
in 75 pounds of oranges being sold as opposed to 50 pounds[/quote]
It follows the trend of price and demand.

Only Option C and E seems to correct, Lets find the better.

In option C, Price of Gasoline Increase -> Public transport Increase.
it depends on leap pf faith (in general this relation may be true, but not discussed in passage)

In option E Relationship is directly illustrated. Hence Option E is better than Option C
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Re: The law of demand states that  [#permalink]

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New post 09 Sep 2016, 20:10
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The argument says that Higher the price = Lower the quantity demanded. So, how can we assume that Lower the price = Higher the quantity demanded would be the right choice for this question?
Even though they are related, how can one assume that the reverse logic would hold good?
Experts please help.
Thank you,
Jat
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Re: The law of demand states that  [#permalink]

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New post 10 Sep 2016, 09:24
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Jat wrote:
The argument says that Higher the price = Lower the quantity demanded. So, how can we assume that Lower the price = Higher the quantity demanded would be the right choice for this question?
Even though they are related, how can one assume that the reverse logic would hold good?
Experts please help.
Thank you,
Jat


The argument you are posing would holds good if the wording were as follows:
" When the price is high, the demand is low" - this statement does not imply that " when the price is low, the demand is high".

However when one says " higher the price, lower is the demand", it is automatically implied that "lower the price, higher is the demand". Both phrases mean the same.

If you are not convinced with the above, consider mathematically:

Consider that when the price is x1, demand is d1
Again consider that when the price is x2, demand is d2.
Suppose x1 > x2.

The phrase higher the prices, lower is the demand implies:

x1> x2 implies d1 < d2.

The above can also be stated as:

x2< x1 implies d2> d1.

This is not a reverse logic - but two different ways of expressing the same principle.
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The law of demand states that  [#permalink]

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New post 09 Mar 2019, 07:40
apoorv601 wrote:
The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will consume that good. In other words, the higher the price, the lower the quantity demanded. This principle is illustrated when_____________ .

(A) Company A has a monopoly over the widget market so an increase in widget prices has little effect on the quantity demanded

(B) a manufacturer of luxury cars noticed that its customer base is relatively unresponsive to changes in price

(C) a city experiences an increase in both gasoline prices and the number of people taking public transportation

(D) an increase in the number of computer retailers led to a decrease in the average price of computers

(E) a reduction in the price of oranges from $2 per pound to $1 per pound results in 75 pounds of oranges being sold as opposed to 50 pounds


The argument is talking about the negative effect of price on the quantity of goods purchased.

(C) a city experiences an increase in both gasoline prices and the number of people taking public transportation => High gasoline prices & high number of people taking public transportation, this doesn't indicate that people decrease private transport and change to use public transport, the relationship of price & quantity of good is so vague.
(E) clearly indicates that when the price decline from $2 to $1 => the quantity of orange purchased increases from 50 punds to 75 pounds.. Hence E
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The law of demand states that   [#permalink] 09 Mar 2019, 07:40
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