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There exists an inverse relationship between price and demand of a commodity. When there is a decrease in the price of oil, the demand for oil increases. This decrease in the price of oil may be due to the fall in the speculation in the commodity market. This makes carrying out production for businesses and households relatively cheaper as the price of gasoline will fall as well. Hence, people will consume more. It also reduces inflation, unemployment and improves economic growth. So, the analysis of the journalist is correct.
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Chapter 3
Where Prices Come From: The Interaction of Demand and Supply
Section 1
The Demand Side of the Market
How Markets Work
Short-Run Economic Fluctuations
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Let's say a journalist wrote, The falling prices leads the men to go up, which leads people to consume more. Do you agree or disagree with this statement? Well, we should not be admitted with this statement. The reason for this being that falling prices does not affect demand off the good. This part is wrong. Falling prices affects quantity demand, not demand itself. Therefore, this statement is incorrect. The correct seaman would be falling. Prices lied to are rising quantity demanded, which in turn leads to higher consumption of the good.
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