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∞2.1.1 Law of DemandoAs the price of a product increases, people purchase less. This is because they are able to find substitutes forthe product in question. These changes create movement along the demand curve.oWhich of the statements is FALSE relating to the Law of Demand?The Law of Demand takes into account all other variables in the market.TRUE of Law of Demand:oIf the producer increases the price of a good, consumers will demand a lower quantity.oConsumers can usually find substitutes to the good in questions.oPerfectly inelastic demand is an exception to the Law of Demand.oUsing the above graph, which of thefollowing statements is false relating tothe Law of DemandWhen Price decreases, thequantity demanded will alwaysincrease by the same amount.True:oThe law of demandexpresses a negativerelationship betweenquantity on the X Axisand price on the Y axis.oA movement along the demand curve is due to a change in price.oA reduction in price will result in an increase in quantity.∞2.1.2 Shifts in Demand
oA demand curve can shift for many reasons. Select thereason below that does NOT shift a demand curve.Changes in the price of the good.DOES:oPrice of substitutes increasesoChanges in preferencesoPrice of complements increasesoDuring the 18thCentury, as troubles with Britain escalated, American colonists stopped drinking British tea, and instead started drinking coffee. This is an example of which factor of demand.Change in taste/preference. oAccording to recent numbers, demand for college education had fallen in recent years. Which of the following examples would indicate a movement along the demand curve?