The Law of Demand states that price and quantity demanded are inversely related. This means that for a normal good, the demand curve slopes downward. A demand curve might slope upward in the event that instead of being a normal good, we could be witnessing a so-called Giffen good. The existence of Giffen goods is debatable, but in theory they can be shown to be possible.
The rationale for the upward sloping demand curve is due to the real income effect on a basket of goods when one (or some) of the goods exhibits a price reduction. Under normal conditions, the reduction in price would allow you to purchase more of that good. However, if this is a Giffen good, the consumer will consume less of it in order to purchase more of another good.
This is not to be confused with an inferior good, for which a reduction in price leading to an increase in purchasing power results in substituting an inferior good (hamburger) in favour of a normal good (steak). This causes a shift in the demand curve. For Giffen goods, no close substitute would cause the consumer to spend less on the cheaper good in order to purchase more of a non-substitute good, say, pencils wherein the cost of rice is reduced.
Actually, supply curve slops upward 9a positive slope). This is due to the fact that as price rises, suppliers would see more benefit in producing these goods (as being able to make more profit).
there would be an eventual upward movement along the demand curve, reestablishing equilibrium
there would be an eventual upward movement along the demand curve, reestablishing equilibrium
Demand curve will be perfect inelastic
An increase in demand is represented by a shift of the demand curve to the right; not a movement along the demand curve. An increase in the quantity demanded would be a movement down the demand curve.
Actually, supply curve slops upward 9a positive slope). This is due to the fact that as price rises, suppliers would see more benefit in producing these goods (as being able to make more profit).
there would be an eventual upward movement along the demand curve, reestablishing equilibrium
there would be an eventual upward movement along the demand curve, reestablishing equilibrium
Demand curve will be perfect inelastic
An increase in demand is represented by a shift of the demand curve to the right; not a movement along the demand curve. An increase in the quantity demanded would be a movement down the demand curve.
by looking at it
The aggregate demand curve shifts to the right
The demand curve would be perfectly elastic.
Yes. Equilibrium is created at the intersection of the Demand curve and Supply Curve. Equilibrium can be shifted if the Demand curve increases or decreases, and the same happens when the Supply curve increases or decreases. Without demand, you would just have a Supply curve.
The aggregate demand curve shifts to the right
We have seen already that demand curves (price Demand) slope downwards from left to right. Since demand curve is only a geometrical representation of the law of demand with 'quantity' on the X axis, and 'price' on the Y axis, the shape of the demand curve has to be necessarily of one sloping downwards showing that more is demanded at a lower price. The question why does the demand curve slope downwards is an indirect way of asking why does the law of demand operate. What are the reasons behind the operation of law of demand? why do people demand more if price comes down? So it is better to discuss the reasons behind the law of demand or the economics of law of demand in order to understand the question under discussion.
Change in demand curve is caused by the change in the price of the product. This is the change that occurs ON THE DEMAND CURVE. The price changes changes the QUANTITY DEMANDED, not the demand curve itself. Shift in demand curve is caused by NON PRICE DEMAND DETERMINANTS. Basically it shifts the ENTIRE curve (right (increase) or left (decrease)). Change in income, change in number of consumers, taste and preferences, price of related goods, and future expectations all cause shifts in demand curve. For example, an increase in the number of consumers would shift the demand to the right because demand would increase.