Chapter 2 Quiz

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What does the Law of Demand state?

As the price of a good increases, the quantity demanded decreases. (correct)

As the price of a good decreases, the quantity demanded decreases.

As the price of a good increases, the quantity demanded increases.

As the price of a good decreases, the quantity demanded increases.

What is the difference between Movement along the Demand Curve and Shift of the Demand Curve?

Movement along the demand curve is caused by a change in income, while shift of the demand curve is caused by a change in price.

Movement along the demand curve is caused by a change in price, while shift of the demand curve is caused by a change in income.

Movement along the demand curve represents a change in quantity demanded due to a change in price, while shift of the demand curve represents a change in demand due to a non-price factor. (correct)

Movement along the demand curve represents a change in demand due to a non-price factor, while shift of the demand curve represents a change in quantity demanded due to a change in price.

What does Price Elasticity of Demand measure?

The responsiveness of quantity demanded to a change in consumer preferences.

The responsiveness of quantity demanded to a change in income.

The responsiveness of quantity demanded to a change in the prices of related goods.

The responsiveness of quantity demanded to a change in price. (correct)

What are the Determinants of Elasticity?

Availability of substitute goods, proportion of income spent on the good, and time period considered. Signup and view all the answers

Why is Demand Forecasting important in business?

It helps in making informed decisions about production and inventory management. Signup and view all the answers

What is the difference between Price Elasticity and Cross Elasticity?

Price Elasticity measures the responsiveness of quantity demanded to a change in price, while Cross Elasticity measures the responsiveness of demand for one good to a change in the price of another good. Signup and view all the answers

What determines the elasticity of demand?

The availability of substitute goods, the proportion of income spent on the good, and the time period considered. Signup and view all the answers

What is the importance of Demand Forecasting in business?

It helps in production planning, inventory management, and pricing strategies. Signup and view all the answers

What is the Law of Demand?

It states that, all else being equal, as the price of a good increases, the quantity demanded decreases. Signup and view all the answers

What is the difference between Movement along the Demand Curve and Shift of the Demand Curve?

Movement along the demand curve is caused by a change in price, while the shift of the demand curve is caused by a change in factors other than price. Signup and view all the answers