Consider the market for cell phones. Suppose the price of a cell phone falls. Explain the effect of this event on the quantity of cell phones demanded and on the demand for cell phones.

Question

Quizplus · Accepted Answer

A decrease in the price of cell phones will lead to an increase in the quantity of cell phones demanded, as consumers will be willing and able to purchase more cell phones at the lower price. However, this does not necessarily mean that there is a shift in the demand for cell phones. The demand curve represents the relationship between the price of a good and the quantity demanded, holding all other factors constant. A change in price of cell phones will cause a movement along the demand curve, but will not shift the entire curve itself. Therefore, the demand for cell phones is unchanged.

Consider the Market for Cell Phones