Unit 2 - Microeconomics

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

The movement shown in this graph represents a change in what?

• quantity demanded
• marginal utility
• demand
• demand elasticity

Based on this graph, how many Beanie Babies™ were demanded at a price of $6 before they became a fad?

• 100
• 200
• 300
• 400

The movement in the graph shows that the quantity demanded of butter decreased because the

• price of butter increased
• the price of margarine decreased
• price of butter decreased
• the price of margarine increased

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