Indifference Curve Analysis and Exceptions to the Law of Demand Quiz

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What are the factors assumed to be constant in drawing a demand curve according to the text?

Consumer preferences and tastes

Consumer income

Prices of substitutes and complementary goods

All of the above (correct)

Why does the demand curve slope downward to the right?

Both income and substitution effects (correct)

Due to income effect

Neither income nor substitution effect

Because of substitution effect

If any change occurs in consumer income, what will happen to the demand schedule or curve?

It will remain the same

It will shift right

It will shift left

It will need to be redrawn (correct)

Which analysis will be used to prove why the demand curve slopes downward according to the text?

Marginal utility analysis Signup and view all the answers

In drawing a demand curve, what is assumed about the buyer's influence on commodity prices?

The buyer takes prices as constant Signup and view all the answers

What effect causes an increase in quantity demanded when the price of a commodity falls?

Both income and substitution effects Signup and view all the answers

What does the coefficient 'b' in a demand function indicate?

The change in quantity demanded resulting from a unit change in price Signup and view all the answers

If the coefficient b1 is -5, what does this indicate?

An increase of 5 units in quantity demanded with a decrease in price Signup and view all the answers

What is described by the law of demand?

The relationship between price and quantity demanded Signup and view all the answers

According to the law of demand, what happens when the price of a commodity falls?

Quantity demanded rises Signup and view all the answers

Which statement correctly describes the relationship between price and quantity demanded according to the law of demand?

Inverse relationship Signup and view all the answers

What can accurately predict the demand for a commodity in future years?

Values of coefficients of various variables of the demand function Signup and view all the answers

According to Veblen's theory of conspicuous consumption, how do some consumers measure the utility of a commodity?

By its price Signup and view all the answers

In the Veblen effect, what happens to the prestige value of diamonds when their price decreases?

Decreases Signup and view all the answers

How does the Veblen effect impact the demand for diamonds when their price rises?

Demand increases Signup and view all the answers

Which economist is associated with the theory of conspicuous consumption and the Veblen effect?

Thorstein Veblen Signup and view all the answers

What is one exception to the law of demand discussed in the text?

Giffen goods Signup and view all the answers

How does Thorstein Veblen suggest some consumers view the utility of a commodity based on its price?

Higher price, higher utility Signup and view all the answers