Home › CA Foundation › Business Economics › Elasticity of Demand › The law of demand states that, other things bein…
The law of demand states that, other things being equal, when the price of a good rises, the quantity demanded of the good will do which of the following?
AStay constant
BRise
CFall
DDouble exactly
Answer & Solution
Correct answer: C. Fall
1. The law of demand assumes ceteris paribus, other things being equal.
2. It states an inverse relationship between price and quantity demanded.
3. So when price rises, quantity demanded falls.
4. The correct answer is that it falls.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit I "Law of Demand and Elasticity of Demand", p.10_
Related questions
Using the Point method on a straight-line demand curve AB, elasticity at point P is given Under the Total Outlay method, demand is said to be unitary elastic when:Which of the following is NOT one of the four methods of measuring elasticity of demand liCross elasticity of demand (Ec) measures:Income elasticity of demand (Ey) is defined as:If proportionate change in demand equals proportionate change in price, the demand is:If a small change in price produces a much larger proportionate change in demand, the demaIf the price of a good changes and demand does not change at all, the price elasticity of