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Law of demand

189 bytes added, 13:30, 14 August 2010
Causation versus correlation: superfical counterexamples
===Independent shifts of the demand curve===
To understand how the causation and correlation issue can be confused, consider a shift in the demand curve due to a change in one of the other [[determinants of demand]] (i.e., an [[exogenous parameter]] in the interaction between demand and price). If the shift is outward(also called an ''expansion'' of the demand curve), i.e., if demand increases for every given price, this causes a tendency for the [[market price]] (the price at which the market clears) to rise. Similarly, if the shift is inward (also called a ''contraction'' of the demand curve), there is a tendency for the market price to fall. This does ''not'' contradict the law of demand, because the change in demand was due to exogenous factors.
===What matters are relative prices -- effects of inflation and simultaneous changes in prices of substitutes===
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