Suppose a producer sells 1,000 units of a product at $5 per unit one year, 2,000 units at $8 the next year, and 3,000 units at $10 the third year.Is this evidence that the law of demand is violated? Explain.

Question

Quizplus · Accepted Answer

The Answer is No.The law of demand shows the relationship between price and quantity demanded.In general, as price falls the quantity demanded will increase.One of the assumptions, however, is that all other things are equal or held constant.In this case, this assumption may have been violated and that is why it seems there is a positive relationship between price and quantity.The most likely explanation for the set of events is that demand for the product increased from one year to the next.If that was true, then price would rise and the equilibrium quantity would increase.

Suppose a Producer Sells 1,000 Units of a Product at $5