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Why does a consumer buy more when price is low and less when price is high?
Wiki User
∙ 12y ago
consumers buy more when price is low because they can then afford more. before
that they could not afford it so there quantity demand for the product will be low. after that it will increase because they will then be able to fully afford the new price. this is not ceteris paribus.
Due to the law of diminishing marginal utility. According to this law as a consumer increases the consumption of a good, the satisfaction derived from each additional unit of the good will go on falling. Secondly it is also because of Rational consumer behaviour, consumers are rational and they want to maximize satisfaction out of their limited means they must therefore decide on how to allocate their limited income over the different goods so that they can maximize total utility.
It also depends on the price effect=income effect+substitution effect(use for normal goods) implying when price falls the income effect is positive, substitution effect is negative and the quantity demanded increases.
There are exceptions too like;
1) Giffen good paradox
2) Engel's law states the proportion of income spent on basic necessities like foodstuffs declines as the level of income rises.
3)Veblen goods(show off) where when prices rises, demand also rises and prices fall, demand also falls.
4) Speculative good-rising prices are accompanied with rising demand_when consumers know that prices would increase more in future,they buy more now and demand rises immediately and prices rises.
Wiki User
∙ 12y ago
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How does consumer expectation affect demand for certine goods?
Consumers will buy more of a good when its price is lower and less when its price is higher.
What is consumer equilibrium?
consumer equilibrium states that consumer maximise his utility with the given income and with the given price or when a consumer getting maximum satisfaction with available resources then he will be in a state of equilibrium.
Will consumer buy more when price of a commodity falls?
according to law of demand consumer buy more of the commodity when price decreases
The principles that states that the consumer will buy less as the price increases?
supply and demand/ it states that as the price of a good or service goes down the more demand will increase and as the price goes up demand decreases
How are consumer surplus and producer surplus measured?
Consumer surplus and producer surplus are measured using the price applied. Consumer surplus is when a consumer pays a less amount than expected while producer surplus is when a product fetches more money that expected.
How does consumer expectation affect demand for goods?
Consumers will buy more of a good when its price is lower and less when its price is higher.
How does consumer expectation affect demand for certine goods?
Consumers will buy more of a good when its price is lower and less when its price is higher.
What is consumer equilibrium?
consumer equilibrium states that consumer maximise his utility with the given income and with the given price or when a consumer getting maximum satisfaction with available resources then he will be in a state of equilibrium.
What are factors that would affect demand?
Change in Consumer Price Expectations: If people expect the price to go up later, they'll buy more now and less later. If they expect the price to go down, they'll buy less now and more later.Change in Consumer Income: If people make more money, they can buy more goods.Change in Consumer Tastes: If people like a good more based on advertising or experience, they'll buy more. If they like it less, they'll buy less.Change in Number of Consumers in the Market: If there are more people buying things, there will be more demand. If there are less people to buy things, there will be less demand.Change in Price of a Substitute Good: If the price of a substitute good, or something you buy instead of something else, goes down, you'll buy less of the original good and more of the substitute.Change in Price of a Complementary Good: If the price of a complementary good, or something you need/use with another, goes up, you'll buy less of the original good. Example: If DVD's rise in price, people will buy less DVD players.
Will consumer buy more when price of a commodity falls?
according to law of demand consumer buy more of the commodity when price decreases
How are consumer affected by illegal price fixing?
In the situation of "price fixing" the consumer generally will have to pay more for a product.
The principles that states that the consumer will buy less as the price increases?
supply and demand/ it states that as the price of a good or service goes down the more demand will increase and as the price goes up demand decreases
How are consumer surplus and producer surplus measured?
Consumer surplus and producer surplus are measured using the price applied. Consumer surplus is when a consumer pays a less amount than expected while producer surplus is when a product fetches more money that expected.
In a market economy a high price will usually cause?
producers to supply more and consumers to buy less.
Does a consumer buy more even when price falls?
Yes
What does the typical family have to do when the consumer price index rises?
When the consumer price index rises the typical family has to spend more money. The price index will directly affect the cost of living for a family.
How consumer demand affect business?
if demand for anything is more than that product will sell more, if there is no demand for an item then that will not sale.so if sales are more there would be more profit ,if sales are less profit will also less. more profit means a good business and less profit means that business is not in a good position. i hope now u can understand it.shortly more consumer demand more good business,less consumer demand less business.
