Question

How does an increase (decrease) in the price of a commodity affect its quantity demanded? Explain it with the help of a diagram.

Answer 1

The law of demand states an inverse relationship between the price of the commodity and its quantity demanded. Accordingly, an increase (decrease) in the price of the commodity from OP₀ to OP₁ (from OP₁ to OP₀) will result in a fall (rise) in the quantity demanded from OQ₀ to OQ₁, (OQ₁, to OQ₀), i.e, an upward (downward) movement along the demand curve DD from A to B (B to A).