Guided Reading Activity 4-1: What is Demand?

The demand for a product is determined by its price, consumer income, and consumer tastes.

• Price, Quality, and Promotion

• Price, Income, and Consumer Tastes

• Quality, Service, and Distribution

• Income, Substitutes, and Complements

Microeconomics is the study of the behavior of individual economic units.

• It is the study of the entire economy.

• It focuses on government policies only.

• It examines the behaviors of individual economic units.

• It solely investigates international trade.

The purpose of a demand schedule is to show the relationship between price and the quantity demanded.

• It shows the relationship between price and quantity demanded.

• It illustrates the relationship between price and quantity supplied.

• It displays the production schedule.

• It indicates profit margins and costs.

The demand curve and the demand schedule both show consumer demand at various price levels. Which option best describes their similarity and difference?

• They are identical since both present consumer demand without any representation differences.

• They both show consumer demand at different prices, but the demand curve is a graphical representation while the demand schedule is a table.

• They are unrelated: one reflects quantity and the other reflects price.

• Both are graphical representations of demand but differ in time period covered.

The Law of Demand states that, ceteris paribus, if the price of a good increases, then the quantity demanded decreases.

• If the price of a good increases, the quantity demanded decreases.

• If the price of a good increases, the quantity demanded increases.

• If the quantity demanded increases, the price increases.

• There is no relationship between price and quantity demanded.

The market demand curve shows:

• the relationship between price and quantity demanded

• the relationship between buyers and sellers

• the relationship between supply and demand

Marginal utility is defined as the additional satisfaction a consumer gains by consuming one more unit of a good or service.

• It is the additional satisfaction gained from consuming one more unit

• It is the total satisfaction from consuming all units

• It is the cost incurred in purchasing one additional unit

• It is the decrease in satisfaction from consuming more units

The principle of diminishing marginal utility affects how much people are willing to pay by causing their willingness to pay to decrease as consumption increases.

• It causes willingness to pay to increase as consumption increases.

• It causes willingness to pay to decrease as consumption increases.

• It has no effect on willingness to pay.

• It leads to unpredictable changes in willingness to pay.

The movement along the demand curve that shows a change in the quantity of the product purchased is caused by a change in the product's price.

• A change in the product's price

• A change in consumer income

• A change in consumer tastes

• A change in the prices of substitutes

When prices drop, demand increases.

• Demand increases

• Supply decreases

• Production increases

• Profit margins increase