Question

A friend, perhaps a Poly Sci. student, reads report that between 2016 and 2017, the quantity...

A friend, perhaps a Poly Sci. student, reads report that between 2016 and 2017, the quantity of coffee consumed increased from 10 to 15 million pounds and the price of coffee increased from $3 to $4 a pound. Your friend says, "Ah-ha! You economists are all wrong. This contradicts your law of demand!" What do you reply to your friend?

Homework Answers

Answer #1

The law of demand says that as the price of goods increase the demand for the goods decrease ceteris paribus i.e. keeping all the other things constant, here, we keep income, taste and preference, the price of the complement and substitute all constant.

when the income increase people will have more money in hand and that will increase the demand for the goods and shift the demand curve to the right. it will increase both the demand and the price of the goods. Not causing a movement along the demand curve but shifting the demand curve itself. The law of demand is correct if we keep all the other things affecting the demand as constant.

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