Question

‘As the price of a good falls, the resulting increased purchasing power may be a reason for increase in quantity demanded’. Do you agree with the given statement? Give reason for your answer.

Answer 1

Yes, as the purchasing power of people increases with the price reduced, the demand for the specific product will enhance.

Demand is the willingness of a person to purchase a certain product and their ability to purchase it at a certain price.

As prices go down and people have more power or ability to purchase the product, their willingness shifts to an upward curve and hence this increased their demand.