Question

At a sales meeting, Erasmus suggests that if prices are increased in May, sales will remain unchanged. He justifies this by referring to the law of demand, which states consumers are too busy to notice any price changes. What does the law of demand actually state?

Answer 1

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The statement made by Erasmus is wrong. The law of demand states that when the price increases, the demand decreases, and vice versa. In other words, price and demand are inversely proportional. This applies when all other factors are constant.