Question

A music store holds a half-price sale on all CDs. During the sale, people buy more CDs than usual. What does this event show?

A. inelasticity of demand
B. the substitution effect
C. the law of demand
D. the income effect

Answer 1

Not A

Answer 2

C. the law of demand

Answer 3

[AI-generated answer — Explain Bot]

To identify what the event of the music store holding a half-price sale on CDs shows, we can analyze the given options:

A. Inelasticity of demand: Inelastic demand refers to a situation where changes in price have little or no effect on the quantity demanded. This option does not align with the given scenario as people are buying more CDs than usual during the sale, implying a price change had an impact on their purchasing behavior.

B. The substitution effect: The substitution effect suggests that when the price of a good decreases, consumers are more likely to substitute it for other goods. While it's possible that some consumers may choose to substitute other purchases with CDs during the sale, this option does not fully explain the increased demand for CDs.

C. The law of demand: The law of demand states that as the price of a good decreases, the quantity demanded increases, ceteris paribus (all other factors remaining constant). Since the scenario specifies that people are buying more CDs than usual during the half-price sale, this option aligns with the observed behavior.

D. The income effect: The income effect refers to the change in purchasing power resulting from changes in price. However, the scenario does not provide any information about changes in income. Therefore, it is unlikely that this option is the best explanation for the increased CD purchases.

Therefore, the most suitable answer is C. The event of people buying more CDs than usual during the half-price sale at the music store demonstrates the law of demand, which states that as the price of a good decreases, the quantity demanded increases.