2/26 Bell Ringer Demand and Supply

What does the law of demand state?

• As price decreases, quantity demanded decreases

• As price increases, quantity demanded decreases

• As price increases, quantity demanded increases

• As price decreases, quantity demanded remains the same

What is the substitution effect?

• People's income increases when the price of a product increases

• People substitute a product with another when its price decreases

• People substitute a product with another when its price increases

• People buy more of a product as its price increases

What does the income effect describe?

• Decrease in income as prices decrease

• Increase in income as prices increase

• Decrease in purchasing power as prices increase

• Increase in purchasing power as prices decrease

What is the law of diminishing marginal utility?

• Price increases as more units are consumed

• Satisfaction decreases with each additional unit consumed

• Satisfaction increases with each additional unit consumed

• Price decreases as more units are consumed

What does the law of supply state?

• As price increases, quantity supplied increases

• As price increases, quantity supplied decreases

• As price decreases, quantity supplied increases

• As price decreases, quantity supplied remains the same

What kind of curve does the supply curve form?

• Downward sloping

• Upward sloping

• Horizontal

• Vertical

What motivates producers to increase quantity supplied?

• Decrease in demand

• Increase in demand

• Decrease in price

• Increase in price