In which statement (s) are "demand" and "quantity demanded" used correctly? (I) "An increase in the price of tea will reduce the quantity demanded of tea." (II) "An increase in the price of tea will reduce the demand for sugar used in tea."

Question

Micheal Monroe

Business

2 April, 02:29

In which statement (s) are "demand" and "quantity demanded" used correctly? (I) "An increase in the price of tea will reduce the quantity demanded of tea." (II) "An increase in the price of tea will reduce the demand for sugar used in tea."

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Answers (1)

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Samir Berry · Answer 1

The correct answer is letter "A": in both statements I and II.

Explanation:

(I) According to the demand law, if the price of tea increases the quantity demanded of tea will decrease. If the price of tea decreases, the quantity demanded of tea will increase. Quantity demanded and the price has an inversely proportional relationship in the demand law.

(II) When talking about complementary goods like tea and sugar, if the price of tea increases will result in a negative movement along the demand curve of tea and will cause the demand curve of sugar to move inwards. In such a scenario, the demand for each good will be reduced.