(Econ) 2.1 Review

Why do people buy less as prices rise according to the Law of Demand?

• Because they have more money.

• Because they need fewer products.

• Because the extra satisfaction from each item goes down.

• Because the quality of products decreases.

• If coffee costs $2, people buy 100 cups, but at $3, they only buy 50. What tool helps companies plan for these pricing changes?

• Demand Schedule

• Supply Correlation

• Inverse Curve

• Diminishing Margin Utility

What does a demand curve show?

• • How much people buy at different prices

• The total revenue of a company

• The supply of goods in the market

• The cost of production

Why do higher prices result in less being bought, illustrating the substitution effect?

• People have more money to spend.

• People switch to cheaper things.

• People buy more expensive items.

• People save more money.

What factor that does NOT affect demand?

• What people like

• How much money people have

• The weather

• Prices of other things

• The more you have of something, the less you enjoy each extra bit. This law is called:

• Utility Scenario

• Cost Effect Analysis

• Diminishing Marginal Utility

• Demand Curve