Theory of Demand and Elasticity of Demand

Multiple Choice

What is the law of demand?

• When the price of a good rises, consumers buy more of it

• When the price of a good falls, consumers buy more of it

• The price of a good does not affect the quantity demanded

• Producers set prices without considering consumer demand

Multiple Choice

Which of the following best defines demand?

• The desire for any good, regardless of price

• The desire and ability to pay for a good or service

• The need for necessities at any price

• The price a producer sets for a good

Multiple Choice

What is a demand schedule?

• A list of prices a producer sets for their goods

• A graph that shows total market demand for a good

• A survey result showing consumer preferences

• A table showing how much of a good or service an individual is willing to buy at each price

Multiple Choice

Why would a business owner use a market demand schedule instead of an individual demand schedule?

• To understand only one customer's buying habits

• To price products without considering demand

• To gain insights into the buying habits of all potential customers in a market

• To avoid using market research data

Multiple Choice

What role does market research play in creating a market demand schedule?

• It helps businesses set high prices to maximize profit

• It allows businesses to ignore individual demand

• It gathers and evaluates information on customer preferences

• It reduces the need for a demand schedule

Multiple Choice

Which of the following best describes the "income effect"?

• Consumers buy less of a product when their income decreases

• Consumers buy more of a product as their purchasing power increases, even if their income doesn't change

• Consumers buy only essential goods when their income changes

• Consumers always spend more on high-priced goods when they get a discount

Match

Match each term with its correct description

• Decrease in satisfaction with each additional unit consumed

• Buying a different buy comparable product due to a price change

• Change in purchasing quantity due to income power adjustment

• Shift in demand due to external marketplace changes

Law of Diminishing Marginal Utility

Substitution Effect

Income Effect

Change in Demand

• Law of Diminishing Marginal Utility

• Substitution Effect

• Income Effect

• Change in Demand

Multiple Choice

Which factor of demand is most directly impacted if a new competitor enters the market and offers a similar product at a lower price?

• Market Size

• Income

• Consumer Expectations

• Substitute Goods

Multiple Choice

An increase in demand would result in a shift of the entire curve to the left

• True

• False

Multiple Choice

Which one of these services would be more elastic?

• Getting a cavity filled at the dentist

• Having your teeth whitened at the dentist

Open Ended

Provide a product or a service that you think would have inelastic demand.

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