Economics: Demand and Quantity Demanded

Questions and Answers

What happens when the price of a good or service increases?

Quantity demanded increases.

Demand decreases. (correct)

Demand increases.

Quantity demanded decreases.

Which statement describes the Law of Diminishing Marginal Utility?

The total amount of a good or service that people consume decreases as price decreases.

Making choices requires trade-offs and opportunity cost because of limited resources.

There is a decrease in satisfaction from each additional unit of a good or service consumed. (correct)

A maximum amount exists for a good or service that will be purchased at a given price.

Which statement accurately describes the relationship between price and quantity demanded?

When prices increase, quantity demanded stays the same.

When prices decrease, quantity demanded decreases.

When prices decrease, quantity demanded stays the same.

When prices increase, quantity demanded decreases. (correct)

Which statement describes the shift from D1 to D2?

Demand for the product increased. Signup and view all the answers

Demand for almond milk __ because of a change in _.

decreased; related goods Signup and view all the answers

Which of the following could explain the shift from D1 to D2?

An increase in the number of buyers for the product Signup and view all the answers

What happens to the total quantity demanded when the price of the product rises above $50?

It will be less than 100 units. Signup and view all the answers

Study Notes

Demand and Quantity Demanded

An increase in the price of a good or service typically results in a decrease in quantity demanded.
The Law of Diminishing Marginal Utility states that as more units of a good or service are consumed, the satisfaction derived from each additional unit decreases.

Price Relationships

The relationship between price and quantity demanded is inverse: as prices increase, quantity demanded decreases. Conversely, a decrease in prices leads to an increase in quantity demanded.

Demand Shifts

A rightward shift in demand (from D1 to D2) indicates an increase in demand for a product.
A change in demand can occur due to factors such as preferences, the number of buyers, or the price changes of related goods (substitutes or complements).

A decrease in the price of one product, like oat milk, can lead to a decrease in demand for another related product, such as almond milk. This occurs due to changes in consumer preferences.
Demand for almond milk decreased because it is related to the price drop of oat milk, showcasing the impact of substitutes in demand analysis.

Influences on Demand

An increase in the number of buyers for a product can shift demand to the right, indicating higher demand.
Total quantity demanded will decrease when the price rises significantly above key thresholds, such as $50 in this case, correlating to reduced consumer willingness to purchase at higher prices.

Description

This quiz covers key concepts related to demand, quantity demanded, and their relationships with price. It explores the Law of Diminishing Marginal Utility and how consumer preferences affect demand shifts. Test your understanding of these fundamental economic principles.