Right before Christmas, the price of Christmas trees went up by 30%, while the quantity of Christmas trees sold increased by 80%80%

Economics Dec 10, 2020

Right before Christmas, the price of Christmas trees went up by 30%, while the quantity of Christmas trees sold increased by 80%80%. Do these figures imply an upward sloping demand curve for Christmas trees? Explain with a diagram.

Expert Solution

No, these figures do not imply that Christmas trees have an upward sloping demand curve. Because this is right before Christmas, demand for Christmas trees increases which is represented by the demand curve shifting to the right. As the demand curve shifts to the right (with the supply curve remaining constant) the intersection between the supply curve and the demand curve which denotes equilibrium price and quantity changes, as can be seen in the graph below.

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