Indifference Curve Analysis and Exceptions to the Law of Demand Quiz
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Questions and Answers

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?

    <p>Marginal utility analysis</p> Signup and view all the answers

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

    <p>The buyer takes prices as constant</p> Signup and view all the answers

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

    <p>Both income and substitution effects</p> Signup and view all the answers

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

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

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

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

    What is described by the law of demand?

    <p>The relationship between price and quantity demanded</p> Signup and view all the answers

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

    <p>Quantity demanded rises</p> Signup and view all the answers

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

    <p>Inverse relationship</p> Signup and view all the answers

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

    <p>Values of coefficients of various variables of the demand function</p> Signup and view all the answers

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

    <p>By its price</p> Signup and view all the answers

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

    <p>Decreases</p> Signup and view all the answers

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

    <p>Demand increases</p> Signup and view all the answers

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

    <p>Thorstein Veblen</p> Signup and view all the answers

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

    <p>Giffen goods</p> Signup and view all the answers

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

    <p>Higher price, higher utility</p> Signup and view all the answers

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