Supply and Demand

According to the law of demand, when the price of a good increases, what happens to the quantity demanded?

• It increases

• It decreases

• It remains the same

• It is unpredictable

Which concept explains the relationship between price and quantity demanded?

• Price elasticity of demand

• Income elasticity of demand

• Substitution effect

• Law of diminishing marginal utility

When the price of a good increases and consumers switch to a cheaper alternative, which effect is at play?

• Price elasticity of demand

• Income elasticity of demand

• Substitution effect

• Law of diminishing marginal utility

Which concept states that as a person consumes more of a good, the additional satisfaction or utility derived from each additional unit decreases?

• Price elasticity of demand

• Income elasticity of demand

• Substitution effect

• Law of diminishing marginal utility

If the demand for a good is highly responsive to changes in price, it is said to be:

• Elastic

• Inelastic

• Unitary elastic

• Perfectly elastic

If the demand for a good is not very responsive to changes in price, it is said to be:

• Elastic

• Inelastic

• Unitary elastic

• Perfectly inelastic

Which concept measures the responsiveness of quantity demanded to changes in income?

• Price elasticity of demand

• Income elasticity of demand

• Substitution effect

• Law of diminishing marginal utility

If the income elasticity of demand for a good is positive, it is considered to be:

• Normal good

• Inferior good

• Luxury good

• Necessity good

If the income elasticity of demand for a good is negative, it is considered to be:

• Normal good

• Inferior good

• Luxury good

• Necessity good

Which effect occurs when the price of a good increases and consumers can no longer afford it, leading to a decrease in quantity demanded?

• Price elasticity of demand

• Income elasticity of demand

• Substitution effect

• Law of diminishing marginal utility