Why Does the Demand for Pears Fall When the Price Increases?

The Law of Demand

The law of demand states that: as the price of a good or service rises, the quantity demanded will decrease, ceteris paribus (all other factors remaining constant). This fundamental economic principle is based on consumer behavior and explains how individuals respond to changes in prices.

Income Effect

When the price of pears increases, consumers experience the income effect. The income effect occurs when a change in price leads to a change in a consumer's purchasing power. As the price of pears rises, consumers may find that their budget can no longer afford the same quantity of pears as before. This reduction in purchasing power incentivizes consumers to buy fewer pears, resulting in a decrease in the quantity demanded.

Substitution Effect

Higher prices for pears can also trigger the substitution effect. The substitution effect refers to consumers substituting one good for another when there is a change in relative prices. When the price of pears increases, consumers may opt for alternative fruits that are relatively more affordable, such as apples or oranges. This shift in purchasing behavior further contributes to the fall in the quantity demanded of pears.

Overall, the decrease in the quantity demanded of pears when the price increases is a result of consumers responding to changes in price, their purchasing power, and the availability of substitute goods. Understanding the law of demand can provide insights into how consumers make choices in a market economy.