Practice question · Multiple choice
Bread sales rise after a recession cuts household incomes. Does that break the law of demand?
Hints
- Which variable does the law of demand actually hold fixed?
- Ask whether this is a move along the curve or a move of the curve.
Show the answer
D. No, the law holds price constant, and here income changed
Why
The law relates price to quantity with everything else held still; income is one of the things being held still, so changing it shifts the curve rather than violating it. Confusing a shift of the curve with a movement along it is the single most common error in introductory demand analysis.
Practise The Demand Curve
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More questions on The Demand Curve
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