Which of the following describes a demand schedule?

• The price that a good or service should be set at to maximize revenue

• The quantity of a product that consumers are willing and able to buy at each unit price

Which of the following would explain the change illustrated in the graph?

• The number of buyers has gone down in the market for Good A

• Average consumer income has decreased, with Good A being an inferior good

How does this graph illustrate the law of demand?

• Quantity demanded has decreased due to an increase in unit price from $12 to $16

• Demand has increased in response to incentives

Chips and salsa are complements. What will happen if the price of chips goes up?

• The demand for chips and salsa will decrease

• The quantity demanded for chips will decrease and the demand for salsa will decrease

Which of the following provides a clear example of the substitution effect?

• After the price of bananas is lowered, Andrew goes out and buys two more bunches

• Stacy wanted ice cream a bit more than a cupcake but chose the cupcake when the price of ice cream increased

Which of the following is an incentive to buy more of a good or service for nearly everyone?

• Regulations make it more difficult to produce

• The product has a lower price

What is the primary incentive of each producer to make widgets?

• The primary incentive of each producer to make widgets is to bring in revenue and maximize profit

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What would happen to the supply of widgets if there was a technological advance that lowered the cost to make widgets? Explain.

• If there were a technological advancement that lowered the cost to make widgets, then the supply of widgets would increase. This is due to the fact that new tech would lower the resource costs so more widgets could be made. If more widgets are made, that is an increase in supply

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Assuming production costs decreased, and that producers will not charge less than $1, would the quantity supplied of widgets be more or less than 11 widgets? Explain

• Assuming the market situation from part (b), and that producers will not charge less than $1, the quantity supplied of widgets would be more than 11 widgets. The technological advancement lowered the production costs of the widget, so producers are able to make more at every price level.

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Identify whether the price of widgets from $8 to $7 is elastic, unit elastic, or inelastic. Explain.

• The price of widgets from $8 to $7 is elastic because the elasticity coefficient calculated with the point formula is 2.64, which expresses elasticity as it's greater than 1 and the revenue increased significantly when the price decreased

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