Unit 3 - Microeconomics

For most products and services, increased price results in

• demand for fewer products.
• demand for more products
• reduced demand for substitutes
• increased demand for complements

An increase in the price of milk causes a decrease in the demand for cereal. The two products are

• substitutes
• complements
• unrelated
• demand elastic

Advertising, fashion trends, and new product introductions serve to

• create consumer needs
• increase income effectiveness
• create consumer demand
• minimize the income effect

Because a modest price increase has little or no effect, the demand for the product is

• complementary
• inelastic
• elastic
• unit elastic

A business doubled the price of a product in order to increase profits. Which of the following scenarios might have occurred?

• A sharp increase in revenues demonstrated the elasticity of the product.
• A small increase in revenues demonstrated the unit elasticity of the product.
• A dramatic decline in revenues demonstrated the elasticity of the product.
• A dramatic decline in revenues demonstrated the inelasticity of the product.

A demand schedule shows

• an upward-sloping curve that illustrates the positive relationship between price and quantity demanded.
• a listing of the various quantities demanded of a particular product at all prices that might prevail in the market.
• the fluctuations in demand that occurred over a specified period of time.
• the fluctuations in demand scheduled to occur over the following year.

Consumers' willingness to replace a costly item with a less costly item is an example of

• the substitution effect
• the income effect
• demand elasticity
• law of diminishing marginal utility

An increase in the price of cameras results in a decrease in the demand for film. The two products are

• substitutes
• demand elastic
• unrelated
• complements

When a customer's need for a product is not urgent, demand tends to be

• inelastic
• elastic
• complementary
• unit elastic

When a manufacturer of pain medication reduced the price of the medication by 30%, profits declined by almost exactly 30%. Demand for the product is

• inelastic
• elastic
• unit elastic
• complementary