Supply and Demand Review

The law of demand states that there is a _________ relationship between price and quantity demanded

• inverse

• direct

• many relationships

• no relationship

According to the law of demand, when price goes up, quantity demanded _____

• increases

• decreases

• stays the same

When you plot prices and quantity demanded on a graph, what is the result?

• demand line

• demand curve

• a straight line

• none of the above

In which direction does the demand curve slope?

• upwards

• downward

• in a straight line

Which of the following is NOT a reason why the demand curve slopes down?

• substitution efect

• income effect

• government involvement

• law of diminishing marginal utility

What is it called when changes in price motivate consumers to buy cheaper substitute goods? (This is a reason why the demand curve slopes the way it does)

• income effect

• substitution effect

• law of diminishing marginal utility

The __________ effect occurs when changes in price affect the purchasing power of customers. They can purchase less with the money they have.

• law of diminshing marginal utility

• substitution effect

• income effect

____________ is another word for utility.

• supply

• demand

• satisfaction

As you consume a product or service, you will eventually get less additional utility from each unit consumed. This is called the _______

• income effect

• law of diminishing marginal utility

• substitution effect

The entire demand curve can only shift if something other than price changes.

• True

• False