If price goes up the demand goes down, but if demand goes down price goes down, but if price goes down demand goes up and if demand goes up then price goes up....
This appears wery strange, but can be explained as follows. Rise in prices causes a decrease in demand as there are less goods sold, but when there is decrease in the demand people buy less it may be caused by change in supply, but...
Help me
Current ratio
6 years ago
2 comments:
isn't it something that depends on Price elasticity of Demand?
this PeD will show how much demand will change if price changes. the rate of PeD depends on many factors such as availabilty, existance of substitues/complements, advertising, fashion.. etc
so it is not always "price falls - demand falls", plus, prices are very important things when we talk about inflation.
also, it depends on income which also causes shifts of demand.
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