Show that demand of a commodity is inversely related to its price.
Explain with the help of utility analysis.
Or
Why is an indifference curve negatively sloped? Explain.
The demand of a commodity is inversely related to its price, suppose a consumer consumes a good X and its price falls. in that case, the consumer will get a greater marginal utility by consuming good X than the other goods. Thus, he will increase the consumption of good X and its demand will increase. however, in case the price rises, the consumer will get lower utility from the consumption of good X and thus, he will reduce the demand for it.
| price of commodity X | demand of commodity of X |
| 10 | 100 |
| 15 | 50 |
| 20 | 25 |
| 25 | 15 |
This analysis of the above schedule shows that quantity demanded of a commodity holds a negative relationship with the price.
It shows that a higher price of quantity demanded of X falls and vice versa. as the price increases from Rs 10 to Rs 15, the quantity demanded falls from 100 units to 50 units.
The demand of a commodity when measured through the expenditure approach is inelastic. A fall in its price will result in :
(choose the correct alternative)
(a) no change in expenditure on it.
(b) increase in expenditure on it.
(c) decrease in expenditure on it.
(d) any one of the above
As we move along a downward sloping straight line demand curve from left to right, price elasticity of demand : (choose the correct alternative)
(a) remains unchanged
(b) goes on falling
(c) goes on rising
(d) falls initially then rises
Complete the following table :
| output units | total cost | average variable cost | marginal cost | average fixed cost |
| 0 | 30 | |||
| 1 | 20 | |||
| 2 | 68 | |||
| 3 | 84 | 18 | ||
| 4 | 18 | |||
| 5 | 125 | 19 | 6 |
When price of a commodity X falls by 10 per cent, its demand rises from 150 units to 180 units. Calculate its price elasticity of demand. How much should be the percentage fall in its price so that its demand rises from 150 to 210 units ?
Average revenue and price are always equal under : (choose the correct alternative)
(a) perfect competition only
(b) monopolistic competition only
(c) monopoly only
(d) all market forms
