Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that
A) the quantity of bananas purchased determines the price of bananas.
B) all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.
C) everyone will buy more bananas when the price falls.
D) one cannot generalize about the relationship between the price of bananas and the quantity purchased.

Question

Quizplus · Accepted Answer

The statement is stating that "other things equal" or in other words, holding all other factors constant, the relationship between price and quantity demanded is inverse. This is the Law of Demand. Option A is incorrect because the statement is suggesting that price determines quantity demanded, not the other way around. Option C is incorrect because not everyone will buy more bananas when the price falls, only those who are price sensitive. Option D is incorrect because the statement itself is a generalization about the relationship between price and quantity demanded.

Suppose an Economist Says That "Other Things Equal, the Lower