Question

Assume you initially sold wrist watches at $75 per watch. At that price, consumers purchased 10 watches per week. You decide to drop the price to $50 per watch. As a result, consumers purchase 35 watches per week. Is this an increase in demand?Explain why or why not.

Answer 1

Answer:

Yes, this is an increase in demand

Explanation:

Demand increased from 10 watches per week to 35 watches per week.

This is an increase in demand and it was induced by the drop in price from $75 to $50.

Consumers tend to buy more at lower price and tend to reduce their demand at higher price. This is the law demand.

Higher price reduces consumers' purchasing power.