Understanding Demand and Supply Theory Quiz
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Questions and Answers

What does elasticity of demand measure?

  • Variation in demand between different market segments
  • Responsiveness of quantity demanded to price changes (correct)
  • Fluctuations in demand over time
  • Total quantity demanded at a specific price level

    • What does the Law of Demand state?

  • The quantity demanded is directly proportional to price changes
  • As the price of a good increases, the quantity demanded increases
  • The quantity demanded is independent of price changes
  • As the price of a good increases, the quantity demanded decreases (correct)

    • What is the difference between movement along the demand curve and shift of the demand curve?

  • Movement along the curve is caused by changes in income, while shift is caused by changes in price
  • Movement along the curve represents short-term changes, while shift represents long-term changes
  • Movement along the curve represents changes in consumer preferences, while shift represents changes in production costs
  • Movement along the curve is caused by changes in price, while shift is caused by changes in other factors (correct)

    • What is the importance of demand forecasting in business?

    <p>To make informed production and inventory management decisions</p> Signup and view all the answers

    What does income elasticity of demand measure?

    <p>The responsiveness of quantity demanded to changes in income</p> Signup and view all the answers

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