4.02 Understand the Law of Demand

In terms of the law of demand, what is said to occur when the price of a good increases?

• The quantity demanded remains the same.

• The quantity demanded increases.

• The quantity demanded decreases.

• There is no affect on the quantity demanded.

If a seller notices he or she is not selling much of a particular product, he or she is most likely going to do what?

• Pull the item off of the shelf.

• Reduce the price of the item.

• Increase the price of the item.

• Place more of the item on the shelf.

When someone chooses to purchase one item over another because it is cheaper, this is known as what?

• the Substitution Effect

• the Income Effect

• the Budget Effect

• the Version Effect

The Income Effect states that if a change in prices causes consumers to have lower real incomes, then consumers would do what?

• Demand a greater quantity of goods than normal.

• Demand a lesser quantity of goods than normal.

• Demand the same quantity of goods as normal.

• Stop demanding a good.

When someone is willing to continue to purchase a good even though its price rises dramatically, the demand for the good is said to be what?

• elastic

• inelastic

• flexible

• unaffected