Trusted by millions of Kenyans
LoginRegister
Study resources on Kenyaplex

Get ready-made curriculum aligned revision materials

Exam papers, notes, holiday assignments and topical questions – all aligned to the Kenyan curriculum.

Browse exam papers
Or go directly to:
Class notes Holiday assignments Topical questions Other resources

Economic theory assumes that consumers will buy more of a product when price falls and less when price rises. Evaluate the view that this assumption...

Economic theory assumes that consumers will buy more of a product when price falls and less when price rises. Evaluate the view that this assumption is unrealistic

Answers

queen
Virtually all demand theory is based on the view that, so long as other factors remain unchanged, rational consumers will be prepared to buy more when price falls and less when it rises. A price fall gives consumers greater real income and also makes substitute goods less attractive. It also increases consumer surplus.
Some economists, however, argue that consumers do not always act rationally, and that there may be circumstances when they would be prepared to buy more of a particular product at higher prices.
Nevertheless, in practice, there seems to be very little evidence to support the existence of an upward sloping demand curve. Many of the examples quoted can often be better explained by shifts of the demand curve brought about by non-price factors.
queen babito answered the question on July 9, 2018 at 06:05

Answer Attachments

Next: Analyse how a change in demand or supply in one market may have effects on other markets

Previous: Analyse the impact of the credit crunch upon aggregate demand in the UK

View more Economics Questions and Answers  |  Return to Questions Index

Exams With Marking Schemes

Related Questions