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- DannyLv 61 decade agoFavorite Answer
Based on the Law of Demand, price and quantity demanded are negatively related,cateris paribus. When some price-related factors change, a reduction in supply for example, market price may rise. When market price rises, according to the Law of Demand, quantity will drop, which is represented by the upward movement of the downward sloping demand curve.
We can consider 3 possible cases:
(1) Change in Demand
B's statement may represent an observation instead of cause-and-result relationship. He does not mean that the price rise causes quantity to rise, but instead the "cateris paribus condition" does not hold. If there is change in factors causing the demand curve to shift up (like an increase in real income or a sense of superiority towards the product), given upward sloping supply curve, both the price and quantity will increase.
(2) Price adjustment
Note that人們買x的數量 refers to quantity transacted not demanded. Due to transaction cost (like lack of information on equilibrium price) or price control, the original price was below equilibrium and casued an excess demand. If transaction cost is reduced or the price ceiling is shifted up or removed, the price will rise, and along the upward sloping supply curve, the quantity transacted will rise as well (although at the same time quantity demanded falls due to Law of Demand).
(3) Giffen Good
In Economics, Giffen Good remains a logical and theoretical possibility. For this kind of goods, when price rises quantity demanded will rise as well (that is Law of Demand does not hold for these goods). However, it occurs only in ex-post sense instead of ex-ante sense, which weakens the predictive power. And most economists tend to eliminate arbitrarily the existence of Giffen Good in the market, under the general equilibrium (according to Friedman) and under competition in non-one man economy (according to Steven Cheung)
- 1 decade ago
"A" is correct, in accordance with the law of demand, which states that the quantity demanded goes down when the price goes up, holding other things being constant.
"B" can also be correct in two cases.
Case 1: Giffen good
The product is an inferior good with negative income effect greater than subtitution effect. When the price of the good goes up, b's real income decreases. Since the product is an inferior, the demand for it will increase with the decrase in real income, driving up the quantity demanded and this increase in quantity demanded outweighs the decrease in quantity demanded due to substitution effect.
Case 2: Homogeneity problem
For b, when the price of the product goes up, it is a sign that less people are able to buy it. Therefore, if b has more of the product, he, at least in the eyes of he himself, will have higher prestige. So his demand for the product increases, driving up the quantity demanded at the new price that the product is sold.
*The product functions differently with the change in price.*
P.S. I am not attacking anyone here, but the thing is it is IMPOSSIBLE that the quantity demanded for a certain product increases with a incrases in price SIMPLY FOR the product is important. Even in the case of necessity, without which one cannot survive, the elasticity of demand is perfectly inelastic, meaning that no matter how high the price of a product is (as long as within the purchasing power of a person), that person demands for the same quantity of that product, but NOT more quantity(i.e. no positive relationship between price and quantity demanded can be shown).
- 1 decade ago
a is right, because if the price is too high, then people may think X does not worth the money. In this case, the demand of X is affected by price.
b is also right, because if the demand is high (for example: rice or clean water), then people do not have a choice to purchase that or not because we all need that product to survive. In this case, even the price of X is increasing, but people may need to purchase even more to stock up that product, in case the price would keep increasing.