Managerial Economics Concepts Quiz

As the marginal utility of a good decreases with increasing consumption, consumers are less inclined to purchase additional units at higher prices, causing the demand curve to slope downward to the right.

The substitution effect occurs when a good becomes cheaper relative to its substitutes, encouraging consumers to purchase more of the good in question and thus increasing demand.

As the price of a good falls, consumers' real income effectively increases, leading to increased demand for the good due to the positive income effect.

<p>Lower prices make goods more affordable to new consumers, increasing the overall demand for the product.</p> Signup and view all the answers

<p>Decreased prices might lead consumers to use a good in less important ways, thus increasing the demand for the good overall.</p> Signup and view all the answers

<p>Giffen goods have a negative income effect that outweighs their positive substitution effect. Examples of these goods include coarse grains like jowar and bajra as well as coarse cloth.</p> Signup and view all the answers

<p>For Giffen goods, consumers tend to purchase more of the good as its price increases, resulting in an upward-sloping demand curve.</p> Signup and view all the answers

<p>Decreased prices effectively increase consumers' real income, which in turn increases demand for the good.</p> Signup and view all the answers

<p>Diminishing marginal utility causes consumers to be less willing to purchase additional units at higher prices, resulting in a downward slope of the demand curve.</p> Signup and view all the answers

<p>Price changes impact consumer behavior through income and substitution effects, with the balance of these forces affecting overall demand.</p> Signup and view all the answers