1. Explain the law of demand and its implications for

individual consumers. Provide an example to support your

answer.

Answer: The law of demand states that as the price of a

good or service increases, the quantity demanded

decreases, ceteris paribus. This means that consumers are

more likely to purchase a higher quantity of a good or

service when its price is lower. For example, if the price of

coffee increases, consumers may choose to switch to a

cheaper alternative, such as tea.

Rationale: This question assesses students' understanding

of the fundamental concept of the law of demand and its

relationship to consumer behavior.

2. Discuss the concept of elasticity of demand and its

relevance to individual consumers. Provide an example to

illustrate a situation of elastic demand.

Answer: Elasticity of demand measures the responsiveness

of quantity demanded to a change in price. When demand

is elastic, a small change in price leads to a proportionally

greater change in quantity demanded. For instance, for

luxury goods like designer handbags, consumers tend to be

very responsive to price changes and may decrease their

purchases significantly when prices increase.

Rationale: This question evaluates students' understanding