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Difficulty: MediumConcept and Law of Demand

The table below presents a household's monthly purchase schedule for local rice at different prices:

Price per bag (₦₦)Quantity Demanded (bags)
12,00020
15,00016
18,00012
21,0008

Based on the data provided, which of the following statements correctly describes the consumer behavior illustrated in the schedule?

  1. The schedule illustrates an inverse relationship between price and quantity demanded, conforming to the law of demand.Answer
  2. B
    The price increases cause a leftward shift of the household's entire demand curve for rice.
  3. C
    The schedule demonstrates joint demand because the price and quantity demanded move in opposite directions.
  4. D
    The observed changes in quantity purchased are driven primarily by non-price determinants of demand.

Answer

The schedule illustrates an inverse relationship between price and quantity demanded, conforming to the law of demand.
The correct answer accurately points out that as the price per bag of local rice rises from ₦12,000₦12,000 to ₦21,000₦21,000, the quantity demanded drops from 20 bags to 8 bags. This inverse relationship directly exemplifies the law of demand, assuming all other factors remain constant (ceteris paribus).

Step-by-Step Solution

1
Examine the relationship between price (PP) and quantity demanded (QdQ_d) in the table.
As price increases (₦12,000→₦15,000→₦18,000→₦21,000₦12,000 \rightarrow ₦15,000 \rightarrow ₦18,000 \rightarrow ₦21,000), quantity demanded steadily decreases (20→16→12→820 \rightarrow 16 \rightarrow 12 \rightarrow 8).
To determine the empirical relationship shown by the consumer schedule.
2
Apply economic concepts to characterize this movement.
An inverse (negative) relationship between a product's own price and the quantity purchased is the fundamental definition of the Law of Demand.
Changes in price lead to movements along a given demand curve (changes in quantity demanded), rather than shifts of the curve itself.

Key Concept

Law of Demand and Quantity Demanded vs Shift in Demand
Estimated Time:1m 0s
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Topics

Concept and Law of Demand

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