Question:

Prices of coconot have been rising each year & people have purchased more violating the law of demand explain?

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For the past 10 years the prices of coconut have been rising and people have purchased more coconut. Price and quantity are directly related and the economist law of demand is incorrect, examine this statement critically

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2 ANSWERS


  1. there was growth in demand, and supply could not keep up. Just like oil prices and consumption.


  2. the trick in this question is the direction of the causality..demand for coconut did not increase because prices have been rising..prices started rising to meet the increased demand..what probably happened is that the supply for coconut remained the same when suppliers noticed an increase in demand and so they raised prices to keep the market at equilibrium.

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