Question

decision point: determining moondogs demand curve
now that youve done your research on the law of demand, you understand that it basically asserts that the amount of coffee buyers would be willing to purchase depends on how much theyll have to pay for each cup.
review the graphs below. select the graph that best represents the demand curve for moondogs coffee, and then click submit.
(graphs and tables for option 1, option 2, option 3 showing price and coffee demanded data, and corresponding graphs)
option 1: table with price from $1.50 to $4.50, coffee demanded 150 cups each; graph with vertical line.
option 2: table with price $1.50 (50 cups), $2.00 (75 cups), $2.50 (100 cups), $3.00 (150 cups), $3.50 (200 cups), $4.00 (300 cups), $4.50 (400 cups); graph with upward - sloping curve.
option 3: table with price $1.50 (400 cups), $2.00 (300 cups), $2.50 (200 cups), $3.00 (150 cups), $3.50 (100 cups), $4.00 (75 cups), $4.50 (50 cups); graph with downward - sloping curve.

Explanation:

Step1: Recall the Law of Demand

The law of demand states that, ceteris paribus, as the price of a good (here, coffee) increases, the quantity demanded decreases, and vice versa. So the demand curve should be downward - sloping.

Step2: Analyze Option 1

In Option 1, the quantity demanded (150 cups) is the same for all prices. This represents a perfectly inelastic demand (a vertical line), which does not follow the law of demand.

Step3: Analyze Option 2

Option 2 has an upward - sloping curve, which would imply that as price increases, quantity demanded increases. This is the opposite of the law of demand (this would be a supply - like curve or a case of a Giffen good, which is not indicated here).

Step4: Analyze Option 3

Option 3 has a downward - sloping curve. As the price of coffee increases from $1.50 to $4.50, the quantity demanded decreases from 400 cups to 50 cups, which is consistent with the law of demand.

Answer:

Option 3 (the graph with the downward - sloping curve, corresponding to the table where quantity demanded decreases as price increases)