Understanding the Law of Demand

What is the law of demand?

• It states that as the price of a good increases, the quantity demanded also increases.

• It states that as the price of a good increases, the quantity demanded decreases.

• It states that the quantity demanded is independent of the price.

• It states that the price of a good is determined by the quantity supplied.

What concept is the law of demand based on?

• Increasing marginal utility

• Diminishing marginal utility

• Constant marginal utility

• Surplus utility

Which of the following is an exception to the law of demand?

• Normal goods

• Luxury goods

• Giffen goods

• Substitute goods

What does the demand curve illustrate?

• A direct relationship between price and quantity demanded

• An inverse relationship between price and quantity demanded

• A constant relationship between price and quantity demanded

• No relationship between price and quantity demanded

What does "ceteris paribus" mean in the context of the law of demand?

• All factors are variable

• All factors are constant except price

• Only income is variable

• Only preferences are constant

How does the law of demand explain price changes during a shortage?

• Prices decrease because demand decreases

• Prices increase because demand increases

• Prices remain constant regardless of demand

• Prices decrease because supply increases

Which of the following factors can affect demand besides price?

• Consumer income

• Consumer preferences

• Prices of related goods

• All of the above

What happens to the quantity demanded when the price of a good decreases, according to the law of demand?

• It decreases

• It increases

• It remains the same

• It becomes zero

What is a characteristic of Giffen goods?

• They are luxury goods

• They have many close substitutes

• They are inferior goods with no close substitutes

• They are always in surplus

Why is the law of demand considered a fundamental principle in economics?

• It explains how supply is determined

• It helps understand market dynamics and resource allocation

• It predicts consumer behavior with absolute certainty

• It is only applicable to luxury goods