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SUPPLY & DEMAND (Lower the price, greater the quantity demanded;…
SUPPLY & DEMAND
Lower the price, greater the quantity demanded; higher the price, smaller the quantity demanded (ceteris paribus assumption)
Exceptions
Giffen goods - Robert Giffen found some products price decline demand also decline. When price rise demand also rise.
Ostentatious goods - Demand for articles of ostentation or display will be higher at a higher price than at a lower price(Eg: Diamond, Jewellery, etc....)
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Obsolete goods - A reduction in the price of an obsolete good is not likely to attract at higher demand.
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Higher the price, greater would be the quantity supplied and lower the price, smaller would be the quantity supplied
(ceteris paribus assumption)
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Non - Excludability - Public goods are collectively consumed and no one can be excluded from their consumption (police patrol security)
Non - Rivalry - consumption of the good by one person does not reduce its benefits to another (street light, roads, etc...)