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

Depreciation in value of money was prevalent from the time human civilization was formed. This makes the price of goods variable mainly going to the increasing side. But when the price of the good falls, it becomes feasible for poor people to buy the product.

                                           Since the population of poor people is much more than of rich people, more number of people purchase the product leading to increase in the purchasing power and therefore, the quantity demand increases so that the product is available to all the people.