Law of Demand

Which of the following best describes the 'law of demand'?

• When price increases, the quantity demanded decreases.

• Demand decreases for a normal good when income increases.

• Legal authorities regulate prices.

• People demand the same amount of a good no matter its price.

• Sellers set the price that demanders pay.

The demand for Good X is given in the graph shown here.

Which of the following could cause the shift of demand shown here?

• Buyers of Good X expect the price of Good X to decrease in the future

• An increase in the number of buyers of a good

• People do not like Good X as much as they did before

• An increase in the price of Good Y, which is a complement to good X

• An increase in income if Good X is an inferior good

Somethings have changed about how consumers buy hats, which has resulted in the change shown in the graph shown here.

Which of the following changes could this graph represent?

• People like hats more than they did before, and their demand for hats has increased because of this

• There has been a decrease in the price of hats, resulting in an increase in the quantity demanded for hats

• People do not like hats as they did before, so their demand has decreased

• People do not like hats as they did before, resulting in a movement along the demand curve

The government of a small town is concerned about the litter created when people leave styrofoam cups used to serve large beverages on the ground. The government decides to tax these by implementing a $1 tax on these drinks.

What is the most likely purpose of this tax?

• Raise tax revenue for a new park

• Reduce the number of beverage sold in styrofoam cups

• Reward sellers of this good

• Increase the demand for these drinks

• Encourage people to throw the cups away

Assume that good A and good B are substitutes for each other. Andrea is currently consuming the utility-maximizing combination of these two goods.

How will the marginal utility of good A (MUA) and marginal utility of good B (MUB) change if Andrea alters her consumption as a result of an increase in the price of Good B?

• MUB will increase and MUA will decrease as the consumer reallocates consumption.

• MUA will increase and MUB will decrease as the consumer reallocates consumption.

• MUA and MUB will both definitely increase.

• MUA and MUB will both definitely decrease.

• MU will both increase, but the MUA will increase by more than the increase in MUB.

Meeps and Blops are two goods that are related to each other. When the price of Meeps goes down, the demand for Blops goes down.

Based only on the information given here, what kind of goods are Meeps and Blops?

• substitutes

• normal goods

• complements

• superior goods

• inferior goods

Which of the following correctly describes a change in quantity demanded and a change in demand?

• A change in quantity demanded is a response to a price change and a change in demand is a response to a non-price change

• A change in demand and a change in quantity demanded both happen in response to price changes

• Both describe a movement along a single demand curve

• The two terms can be used interchangeably

• A change in quantity demanded occurs when price increases and a change in demand occur when a price decreases