What type of relationship exists between price and quantity demanded on a demand curve?
A. Positive relationship
B. No relationship
C. Inverse relationship
D. Variable relationship
E. Fixed relationship
The Correct Answer and Explanation is :
The correct answer is C. Inverse relationship.
Explanation:
On a demand curve, there is an inverse (or negative) relationship between price and quantity demanded. This means that, as the price of a good or service increases, the quantity demanded for that good or service typically decreases, and conversely, as the price decreases, the quantity demanded increases.
This relationship is fundamental to the law of demand, which states that, all else being equal (ceteris paribus), the quantity demanded of a good falls when its price rises, and the quantity demanded rises when its price falls. The law of demand reflects consumer behavior: when prices rise, consumers may be less willing or able to buy the good or service, leading to a decrease in the quantity demanded. On the other hand, lower prices make the good or service more attractive to consumers, which tends to increase the quantity demanded.
The demand curve on a graph typically slopes downward from left to right, representing this inverse relationship. The y-axis typically shows the price, and the x-axis represents the quantity demanded. The downward slope visually demonstrates that higher prices are associated with lower quantities demanded, and lower prices are associated with higher quantities demanded.
In real-world scenarios, this relationship can be observed in many markets. For example, if the price of a popular smartphone increases significantly, fewer consumers may be able to afford it, leading to a reduction in sales. Conversely, if the price decreases, more consumers might choose to purchase the phone, increasing sales. However, it’s important to note that there can be exceptions to this relationship, such as with Giffen goods or Veblen goods, where the demand curve may not behave as expected. But in most cases, the relationship between price and quantity demanded remains inversely proportional.