Relationship Between price and Quantity Demanded
- From prior experience, we know that if the price of something falls, we want it more
- Similarly, in a supermarket, a price reduction in a product we normally buy will result in an increase in the quantity demanded
- So as price increases, demand decreases
- This is an inverse relationship
- In considering matters of demand and price, we assume consumers are rational, and if products are exactly the same, they will opt for the cheaper on.