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The demand curve for kerosene is upward sloping as the price of kerosene rose the...

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petersulochana | Student, Undergraduate | eNotes Newbie

Posted April 1, 2011 at 11:09 AM via web

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The demand curve for kerosene is upward sloping as the price of kerosene rose the quantity demanded of kerosene increased. What question did we raise?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted April 1, 2011 at 11:30 AM (Answer #1)

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I am sorry, but your question is a little hard to understand.

First of all, the demand curve for a good or service is downward sloping (higher on the left, lower on the right) when the vertical axis shows price and the horizontal shows quantity. This is because the quantity demanded for any good or service goes up as the price goes down (all other things being equal).

If the price of kerosene went up and the quantity demanded went up as well, something must have happened to move the demand curve.  That is the question that arises--what caused the demand curve to move.

If the price went up and the quantity demanded went up, something must have increased demand and you would need to ask what it was that caused demand to increase.  This could be something like a rise in the price of goods that compete with kerosene or an increase in the population of an area that uses kerosene.

So, there are two points to be made.  First, a demand curve does not slope upward.  Second, if price rose and quantity demanded rose, the demand curve must have moved to the right (demand must have increased).  Therefore, the question raised is "why did the demand curve move?"

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justaguide | College Teacher | (Level 2) Distinguished Educator

Posted April 1, 2011 at 1:18 PM (Answer #2)

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The question that was likely to be raised was: Is kerosene a giffen good?

The usual law of demand in economics gives a downward sloping demand curve. This implies that people buy more of a good if the price drops and with a rise in price the quantity of the good consumed decreases.

There are some goods which on the other hand display an upward sloping demand curve. More of them are bought as the price increases, instead of the other way round. These are referred to as inferior goods, and in some cases as giffen goods.

There are many reasons why this happens. For example, some luxury goods which only the extremely rich can afford are bought as status symbols. When the price drops, but not to an extent that they are affordable by people with a substantially lower income, the goods are no longer perceived to be ones that can be flaunted. The original buyers move to other alternatives which are more expensive and suit their intended purpose. But the price has not fallen low enough for those not in the category of "the extremely rich" to start buying them.

For other reasons why some goods show an upward sloping demand curve check the links given below.

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