Chapter 7, Problem 1AA

To determine

To explain: Demand using all the terms given in a paragraph.

Explanation of Solution

Law of demand states that the quantity demanded (Qd) of a commodity or service and its prices are inversely associated with each other when other things remain the same. It means that when the price of a commodity rises, its quantity demand will fall and vice versa. Demand curve shows the association between the price and quantity demanded. It shows that how much commodities and services are demanded at a given level of price. The demand curve is a downward sloping line because of the law of diminishing returns to scale. This law states that when a person starts consuming more and more number of commodities and services, there utility or the level of satisfaction starts fall due to which they are less willing to pay for it. The price elasticity of demand influence the demand in an economy as it directly helps in measuring the amount of fall or rise in the quantity demanded when the price of the commodity rises or falls. Therefore, if the demand is more elastic, it means that with a smaller fall in the price of commodity, there will be a large increase in quantity demanded.

Economics Concept Introduction

Introduction: In microeconomics, the chapter of demand and supply occupies a significant position. The quantity of a product in the market is supply, and demand is the amount that people want to buy. Find a specific commodity, such as petrol. When there is a greater demand for gas but less for oil then there will be rise in price.