Question

The inquisitive student in 6^th grade now wants for you to explain to him/her about the demand curve for 6-pack bottles of 16.9 ounce Mountain Dew when they are offered at your local Walmart at prices of $2.50 (during the first week of the month); $2.75 (during the second week of the month); $3.00 (during the third week of the month); and $3.50 (during the fourth week of the month). And, there are typically 1,000 Mountain Dew drinkers in your local area who tend to purchase Mountain Dew, weekly, at your local Walmart

Answer 1

In the given scenario, price of the Mountain Dew increases each week in the month as we move from first week to second and to third and then fourth week of the month. So, price is lowest in the first week of the month and highest in the fourth week of the month. It will cause the quantity demanded to be highest in the first week of the month and lowest in the last week of the month. It will make demand curve to be downward sloping in nature. So, demand curve has negative slope. For example, if 1000 people start buying mountain dew in the first week of the month, then some of the customers will exit and remaining customers (such as 800) will buy mountain dew at the increased price in the second week. Finally in the last week, only few people will buy mountain dew. It is due to the reason that quantity demanded decreases with an increase in price and vice versa. It makes demand curve to be downward sloping, justifying the law of demand, implemented in the case of Mountain dew.