In year 1 the average price of X is $10, and in year 2 the average price of X is $23. If consumers buy more units of X in year 2 than in year 1, it follows that

Question

Damion Park

Business

10 September, 06:30

In year 1 the average price of X is $10, and in year 2 the average price of X is $23. If consumers buy more units of X in year 2 than in year 1, it follows that

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Answers (1)

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Wilson Bright · Answer 1

E. b and d

Explanation:

If consumers buy more unit of X in year 2 than in year 1, it can be as a result of increase in the demand for good X in year 2 or increase in the income of buyers in year 2 as compared to year one. Increase in income of buyers or consumers leads to an increase in the purchasing power of the buyer. Therefore, even with increases in prices, the buyers would be able to buy more unit because of the increase in purchasing power. Also, the demand for good X in year 2 plays a major role. The more the demand for a particular good, the more unit of that particular good is purchased. Even with increase in price on year 2, good X may be a necessity good meaning, increase in prices will not reduce demand.