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CMA Foundation · Fundamentals of Business Economics and Management · Theory of Demand and Supply

A mobile accessories shop sells 120 phone chargers a week at ₹500 each. The shop cuts the price to ₹450 and sells 150 chargers a week, with no other factor changing. Which statement is correct?

Quantity demanded has extended by 30 units, which is a movement down along the same demand curve. The only change was the charger's own price, falling from ₹500 to ₹450, so the demand curve itself did not shift and demand is unchanged.

  1. ADemand has increased by 30 units because the demand curve shifted rightward
  2. BQuantity demanded has extended by 30 units, a movement along the same demand curveCorrect
  3. CDemand has decreased because the price has fallen
  4. DQuantity demanded has contracted because revenue per unit has fallen

Explanation

The price of the charger itself changed from ₹500 to ₹450 and sales rose from 120 to 150 units. This is an extension of quantity demanded, a movement down the same curve. Since only own price changed, the curve has not shifted, so the claim of increase in demand is wrong.

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