Question

When the price of butter was "low," consumers spent $5 billion annually on its consumption. When the price doubled, consumer expenditures increased to $7 billion. Recently you read that this means that the demand curve for butter is upward sloping (i.e., price and quantity demanded are directly related, as price increases, quantity demanded also increases). Do you agree? Explain.

Answer 1

Answer:

The correct answer is: No, this situation is impossible.

Explanation:

To begin with, in the reality the situation with the demand curve is all the opposite. The law of demand establishes that there is an indirect relationship between the price of a product and its quantity demanded in the market, therefore that when the price of a good increases then its quantity demanded decreases. And it is by logic as well, because no one will buy more of something if the products is more expensive than it was before. Therefore that the situation in the text is impossible and it could only be opposite.