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Question
Microeconomics
Posted 4 months ago
Owen saw that the price of peaches had gone down, and so he decided to buy more peaches.
Based on this information only, what does Owen's reaction reflect?
Choose 1 answer:
(A) Owen's demand for peaches has increased.
(B) Owen's quantity demanded for peaches has increased.
(c) Owen has experienced an increase in income.
(D) Owen observed that there has been an increase in the price of other fruit, a substitute for peaches.
(E) Owen expects future price changes.
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Answer from Sia
Posted 4 months ago
Solution
a
Definition of Quantity Demanded: Quantity demanded refers to the amount of a good that consumers are willing and able to purchase at a given price
b
Price and Quantity Demanded Relationship: According to the law of demand, there is an inverse relationship between price and quantity demanded. When the price of a good decreases, the quantity demanded increases, assuming all other factors remain constant
c
Owen's Reaction: Owen's decision to buy more peaches because the price has gone down reflects an increase in the quantity demanded, not an increase in demand. An increase in demand would imply a shift of the entire demand curve, which is not indicated by the information given
Answer
(B) Owen's quantity demanded for peaches has increased.
Key Concept
Quantity Demanded
Explanation
Owen's reaction to the price decrease of peaches is an example of an increase in quantity demanded, as per the law of demand. This is different from an increase in demand, which would involve a shift in the demand curve due to factors other than price.
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