Question

What effect will a drop in price most likely have?

Answer 1

The correct option is "increase the quantity demanded of goods"

The law of supply and demand is a basic economic model postulated for the formation of market prices of goods within the neoclassical school and other related, being used to explain a variety of phenomena and processes both macro and microeconomic. In addition, it serves as a basis for other theories and economic models.

The model in its simplest version is based on the relationship between the price of a good and its sales, and assumes that in a market of perfect competition, the market price will be established at a point -called point of equilibrium- in which produces an emptying of the market, that is, everything produced is sold and there is no unmet demand. The postulate of supply and demand implies three laws:

1. When, at the current price, the demand exceeds the supply, the price increases. Conversely, when the supply exceeds the demand, the price decreases.
2. An increase in the price decreases, sooner or later, the demand and increases the supply. Conversely, a decrease in the price increases, sooner or later, the demand and decreases the supply.
3. The price tends to the level at which the demand equals the supply.

Answer 2

Based on the options given, the most likely answer to this query is increase the quantity demanded of goods

When there is lesser prices on goods, the demand of the goods will most probably rise.
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