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”.
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| 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’.
