What do you mean by Decrease in Price

What do you mean by Decrease in Price?

Demand of any goods and services always show a preference or choice among the options available in the market. A consumer always buys that combination where his satisfaction is higher. In other words, we can say that demand always show a “strong order from consumer side”. 

We know that when there is “increase in the income, we increase our buying behaviour. Sorely demand decrease of there is a price hike of that particular goods and services”.

Decrease in Price

Fall or decrease in Price

We assume that a consumer spend all his income to buy these two product. So, consumers always prefer to buy a strong combination where he will be maximum satisfaction. Demand has a positive correlation with income. We prefer a cheaper goods & services against a high price. If there is a fall or decrease in price of goods and services in our combination so we always prefer to buy that product or we increase the quantity of that product or services.

If there is a decrease in the price of ‘y’ goods so consumers increase the buy of ‘y’ in the combination. A new consumer combination line is drawn ‘LN’. When there is a decrease in price of ‘y’, it increases the real income of consumer. So a consumer shift its money to buy more ‘y’ goods and drawn another line like ‘AB’. We called it “over-compensation effect”. Now, a consumer prefers to buy a combination on ‘c’, where good ‘y’ is more than the good ‘x’.