(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2 Q and supply by the equation P = 2 + 0.2 Q. If demand changes from P = 10 - 0.2 Q to P = 7 - 0.3 Q, we can conclude that

A) demand has increased.
B) demand has decreased.
C) supply will increase.
D) supply will decrease.

Question

Ramit Shivansh · Accepted Answer

Final Answer : B, Explanation :  The original demand equation is P = 10 - 0.2 Q, and the new demand equation is P = 7 - 0.3 Q. The decrease in the intercept from 10 to 7 and the increase in the absolute value of the slope from 0.2 to 0.3 both indicate that at any given price, consumers now want to buy less of the commodity than before, which means demand has decreased.

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