Economics Chapter on Demand and Utility

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Questions and Answers

What does the demand curve illustrate?

The direct relationship between price and quantity demanded
The quantity of goods available for purchase
The total supply of a good in the market
The inverse relationship between price and quantity demanded (correct)

The quantity demanded increases when the price of a good rises, assuming all other factors remain constant.

False (B)

What is the definition of marginal utility?

The extra satisfaction from consuming an additional unit of a good within a given period.

The combination of two goods that a consumer can buy by allocating all their income is represented by the _______.

budget line Signup and view all the answers

Match the economic terms with their correct definitions:

Law of Demand = Inverse relationship between price and quantity demanded Demand Schedule = Table showing quantity demanded at different prices Utility = Satisfaction derived from consumption of good Budget Line = Combinations of two goods a consumer can buy Signup and view all the answers

At which price would a consumer demand the highest quantity of the good, based on the following demand schedule?

$4 for 6 units (C) Signup and view all the answers

A demand schedule is shown as a graphical representation of quantity demanded at various price points.

False (B) Signup and view all the answers

What happens to the quantity demanded when the price of the good falls, assuming other factors remain constant?

The quantity demanded increases. Signup and view all the answers

What type of goods are characterized by not being high-end?

Inferior Goods (A) Signup and view all the answers

Changes in price yield no change in demand for goods classified as perfectly elastic.

False (B) Signup and view all the answers

What impact do expectations about future events have on demand for certain goods?

They can increase or decrease demand depending on the events. Signup and view all the answers

The law of supply states that as the price increases, the quantity _____ increases.

supplied Signup and view all the answers

Match the following concepts with their definitions:

Supply Schedule = A tabular representation of the quantity supplied at different prices Quantity Supplied = The specific quantity of a good that producers are willing to supply at a particular price point Inferior Goods = Goods for which demand increases as consumer income decreases Perfectly Inelastic = Demand that does not change with price changes Signup and view all the answers

Which of the following factors does NOT affect the supply of a good?

Consumer Preferences (D) Signup and view all the answers

The higher the price of goods, the lower the quantity supplied according to the law of supply.

False (B) Signup and view all the answers

Canned goods like sardines and noodles see an increase in demand during the _____ season.

rainy Signup and view all the answers

What does the law of diminishing marginal utility suggest?

Utility declines as more of a good is consumed. (A) Signup and view all the answers

An increase in income generally leads to a decrease in the demand for normal goods.

False (B) Signup and view all the answers

What is the ratio that represents price elasticity of demand?

The ratio of the percentage change in quantity demanded to the percentage change in price. Signup and view all the answers

A good that has a price elasticity greater than one is said to be ______.

elastic Signup and view all the answers

What happens to demand when the price of a substitute good falls?

Demand for the original good decreases. (C) Signup and view all the answers

Complementary goods are those that are typically purchased instead of each other.

False (B) Signup and view all the answers

What effect does population growth have on demand?

It increases the number of potential consumers. Signup and view all the answers

Match the terms to their definitions:

Normal Goods = Goods for which demand increases as income increases Substitute Goods = Goods that can replace each other in consumption Complementary Goods = Goods that are consumed together Inelastic Demand = Demand that does not change significantly with price changes Signup and view all the answers

What is the effect of a technological innovation that reduces cost on supply?

It increases the supply of goods. (A) Signup and view all the answers

An increase in the prices of inputs will generally lead to a decrease in the supply of goods.

True (A) Signup and view all the answers

What happens to supply when the number of producers in a market increases?

Supply increases. Signup and view all the answers

When producers expect the prices of their products to __________, they may try to sell their inventory at current prices.

fall Signup and view all the answers

Match the following terms with their descriptions:

Supply Curve = Graphical representation of quantity supplied at different prices Producer Expectations = Anticipation of price changes affecting current supply Input Prices = Costs associated with labor and raw materials Complementary Goods = Goods that are jointly produced Signup and view all the answers

Which factor is NOT a reason for an increase in supply?

Increase in input prices (C) Signup and view all the answers

A higher price of a good will always lead to a decrease in the quantity supplied.

False (B) Signup and view all the answers

What is the primary characteristic of complementary goods?

They are goods that are jointly produced using a given resource. Signup and view all the answers

Flashcards

Law of Demand

The claim that the quantity demanded of a good falls when the price of the good rises, all other factors being equal.

Demand

The willingness and ability of buyers to purchase goods and services.