Suppose all prices decrease by 5 percent in the year while the total sales of laptops remain constant. This is
A) a violation of the law of demand since fewer laptops should be purchased at a higher price.
B) a violation of the law of demand since more laptops should have been purchased with higher incomes.
C) not a violation of the law of demand since the relative price of laptops did not change.
D) not a violation of the law of demand since the law of demand does not apply to expensive goods like laptops.

Question

Quizplus · Accepted Answer

The law of demand states that as the price of a good decreases, the quantity demanded increases, ceteris paribus. However, in this scenario, the decrease in price is accompanied by a constant level of total sales. This suggests that while the price of laptops decreased, the relative price did not change as buyers still purchased the same number of laptops as before. Thus, it is not a violation of the law of demand.

Suppose All Prices Decrease by 5 Percent in the Year