Question:
When a demand curve is drawn, the assumption is that
(1) quantity demanded always increases as price falls.
(2) quantity demanded always decreases as price falls.
(3) changes in price do not influence supply.
(4) price elasticity of demand does not vary along the demand curve.
(5) factors affecting demand, remain constant, other than price.
Correct Answer:
(5)
Answer Explanation:
To isolate the relationship between price and quantity demanded on a 2D graph, economists use the assumption of ceteris paribus (all other things being equal). This assumes income, tastes, and prices of other goods remain perfectly constant.
Topic: Demand Theory Year: 2018
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