Econ Unit 2 FA Dummy 3, 2025-26

In which situation would the concept of prices be least applicable?

• Buying a car from a dealer

• Trading goods in a barter system

• Purchasing a book online

• Paying for a haircut

When the price of a good drops, and a consumer can afford to buy more of it because their purchasing power has increased, this change in consumption is called:

• Income Effect

• Substitution Effect

• Price Elasticity

• Demand Curve Shift

The change in quantity demanded due to a change in consumer purchasing power resulting from a price change is known as:

• Income Effect

• Law of Diminishing Returns

• Supply Shock

• Marginal Utility

Which term describes how a lower price allows consumers to buy more of a good because they effectively feel richer?

• Income Effect

• Consumer Surplus

• Cross Elasticity

• Market Equilibrium

What is the term for the change in how much of a product people buy when the price changes, affecting their real income?

• Income Effect

• Price Ceiling

• Opportunity Cost

• Demand Forecast

In a study, if the price of coffee falls by 20% and consumers increase their coffee consumption by 15% due to feeling wealthier, this increase is primarily attributed to:

• Income Effect

• Substitution Effect

• Externalities

• Marginal Cost

Imagine a student has a fixed budget. When the price of their favorite snack decreases, they buy more of it because they can now afford more overall. This scenario illustrates the:

• Income Effect

• Bandwagon Effect

• Diminishing Marginal Returns

• Sunk Cost Fallacy

How applicable is the income effect when a price drop leads consumers to buy more goods because their effective income rises?

• Highly applicable because purchasing power changes

• Not applicable because prices don’t affect income

• Somewhat applicable only for luxury goods

• Not applicable in perfectly competitive markets

When a decrease in the price of a good increases consumers' real purchasing power, which effect best explains why they buy more of that good?

• Income Effect

• Price Floor

• Substitution Effect

• Demand Elasticity

What term describes the idea that each additional unit of a good or service provides less satisfaction than the one before it?

• Diminishing Marginal Utility

• Increasing Returns

• Opportunity Cost

• Supply and Demand