Question
Hi community , I am Alexandr from hight school, I was though this idea while study about supply and demand. I knew this could be
Hi community , I am Alexandr from hight school, I was though this idea while study about supply and demand. I knew this could be wrong, however i present it to the community in order to help correct me. Thanks
Assume that we have product A, According to the law of demand and the concept of diminishing marginal utility , if the price of A rise, the demand much be fall becaue each extra unit consume will create less pleasure unless the price of of product A decrease.
But i have a thinking whether the price and demand go similar direction. Hyposthesis that price of product A drop will cause the demand for product A drop too instead increase like the law of demand suggest. I think that the more price of product A decrease will help people afford to buy more product, but the more they consumption of the product, the satisfaction will get less and less. Therefore will cause the demand drop as much as the price isnt it.
Opposite with that, if the price of product A increasing, the demand for it also should increasing. I knew it so silly right lol, but according to the content we learn, if we consumption less, the amount of utility unit is more higher isnt it ( Like water and diamond concept ) So therefore I assumption that the higher of product will cause us to have higher demand for it more because it bring us more utility.
I knew what i saying is different than what we used to learn in hight school, because we learn that if the price rise, the demand go down ( because of the subtitues effect) if the price down, people want to buy it more( because of the dimisnihgh marginal utility ) and causing the demand to go up
In my example about, i am exclude Product A is gifffen goods because it is exception of diminishning margial utility ( which price correlated with demand because of income effect is over subtitues effect )
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