Introduction to Supply and Demand

What is the relationship between the price of an item and the quantity demanded?

As the price of a good increases, the quantity demanded of the good decreases

• The usefulness or satisfaction we get from a product gives us an incentive to acquire more of it.

• The quantity demanded varies inversely with its price.

What is the income effect?

• When the IRS takes more of your money when you make more.

• When consumers can buy more if their income goes up.

• When the amount of money you earn increases.

• None of the above

A change in the price of a good causes people to buy more or less of an item. This best describes the concept of

• 
  the demand curve

• change in quantity demanded

• 
  change in demand

• elasticity

What is the effect of a change in price on quantity demanded?

• Price is the main factor that determines the quantity demanded.

• A change in price results in a change in quantity demanded.

• An increase in consumer income can shift the demand curve to the right.

• As consumer tastes make a product more appealing, the demand curve shifts.

The amount of a good or service that consumers are willing and able to buy at a SPECIFIC PRICE

• 
  Demand

• Demand capacity

• 
  Supply

• Demand table

Which is an example of the substitution effect?

• When the price of one item goes up, so the price of another goes up with it

• When someone decides something is popular, they buy more of it.

• When the price of pencils goes up, people will buy pens instead

• None of the above

Which of the following cause a change in demand? (you can pick more than one)

• Consumer Income

• Consumer Tastes

• Number of consumers

• None of the above

The definition of the law of diminishing marginal utility

• As more units are consumed the marginal utility falls.

• As more units are consumed the marginal utility increases.

• As price decreases quantity demanded increases.

• As price increases consumers are willing to pay more.

The desire to have some good or service and the ability to pay for it

• supply

• 
  equilibrium

• 
  demand

• quantity demanded

Market demand curves are obtained by

• determining the price each consumer is willing to pay for the good & summing those prices across all consumers

• observing the prices and quantities sold in a market over time and plotting those price-quantity combinations in a graph

• summing the quantities every consumer is willing to buy at each different price

• observing the behavior of an individual consumer in a market