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Questions and Answers
What happens to the demand for a good if its price increases, assuming all else remains constant?
What happens to the demand for a good if its price increases, assuming all else remains constant?
- The demand increases due to higher perceived value
- The demand fluctuates unpredictably
- The demand decreases according to the law of demand (correct)
- The demand remains constant as price and demand are unrelated
What does a high price elasticity of demand indicate?
What does a high price elasticity of demand indicate?
- The good is a necessity with no close substitutes
- Consumers are insensitive to price changes
- The good is a luxury with many substitutes
- Consumers are very responsive to price changes (correct)
If the cross-price elasticity of two goods is negative, what does this indicate about their relationship?
If the cross-price elasticity of two goods is negative, what does this indicate about their relationship?
- There is no relationship between the goods
- They are complementary goods (correct)
- They are substitute goods
- They are unrelated in the market
