Answer to Question #127061 in Microeconomics for Kaleb Van der merwe

Question

Non-economists often make mistakes when thinking about economic issues. Use a real-life example to illustrate one of the common mistakes made in thinking and reasoning about economic issues. Structure your answer as follows:
 Name (classify) and briefly explain a common mistake being made when
thinking about economic issues (3);
 Briefly describe a real-life situation applicable to the mistake that you
mentioned (2).

Answer 1

A rise in prices cause falling demand.

Taking a normal demand curve, an increase in price causes a reduction in demand, price affects movement along the demand curve hence less purchases will be done by consumers.

Real life situation.

Taking an example of rentals in an area where it's demand is very high, the owner of the rental can increase the rent because the tenants will have to live in the rentals because shelter is a basic need. Hence, prices of an asset could be rising due to rising demand.