The price and quantity at a point on the demand curve of good are given as 10 and 50 respectively. If the price is changed to 6 and as a result quantity changes to 65, how do you explain the change?
Answer & explanation
Correct answer: option 4
Changes in the demand for a commodity can be classified in 2 ways:
- shift in the demand curve- changes due to factors other than price
- movement along the demand curve- changes caused due to price
Change in own price of the commodity cause movement along the demand curve which is also known as change in "Quantity demanded" of the product. Whereas, changes due to other factors than price cause shift in the demand curve which is also known as change in "demand" of the product. In the above question, increase is due to own price of the commodity, thus option 4 will be the correct answer.