Demand for something has an inverse connection with price. The Law of Demand is the name given to this.
<h3>How will demand be affected if the cost of video games drops?</h3>
The law of supply states that a decrease in price will result in a decrease in the supply of video games. On the other hand, there will be an increase in demand if video games are made more affordable. Demand for something has an inverse connection with price. This is known as the Law of Demand. As the price increases, the amount demanded declines (but demand itself stays the same). As prices fall, demand increases proportionately.
<h3>The cost of ice cream goes up according to the substitution effect, what will happen?</h3>
According to the substitution effect, people switch to less expensive alternatives as prices rise or incomes decline. The replacement impact tracks how consumers' spending habits change in response to price changes. In the scenario mentioned above, more popsicles rather than ice cream will be purchased. Popsicles will become more popular while ice cream consumption will decline.
<h3>What will happen to coffee's price when people quit purchasing tea?</h3>
People forgo buying tea in order to continue buying coffee if the price of coffee rises. Consumption of tea decreases while consumption of coffee increases. The shift in consumer spending dependent on income is known as the income effect. This implies that consumers will generally increase their spending if their income rises. If their income decreases, they might spend less. The effect does not determine what products consumers will purchase.
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