Pam graduates from law school and gets a position in a law firm. At the same time the price of hamburger falls while other food prices have stayed the same. She notices that she buys less hamburger than she did before. Is she violating the law of demand?
A) Yes, since she is buying less hamburger at a lower price.
B) Yes, since she is buying less hamburger in a relatively short period of time and we wouldn't expect her tastes to have changed.
C) No, since the law of demand refers to relative price changes and the price of hamburger falling is an absolute price change.
D) No, since other things are not held constant, such as her income.

Question

Quizplus · Accepted Answer

The law of demand states that, all else being equal, as the price of a product decreases, the quantity demanded of it will usually increase. In Pam's case, her income has increased due to her new job, which is a significant factor that is not held constant. This change in income could lead to a change in her purchasing behavior, such as opting for more expensive foods over hamburgers, which does not violate the law of demand.

Pam Graduates from Law School and Gets a Position in a Law