Understanding Demand in Economics

What does the law of demand state?

• Price and quantity demanded are unrelated.

• There is a direct relationship between price and quantity demanded.

• There is an inverse relationship between price and quantity demanded.

• Quantity demanded remains constant regardless of price.

What happens to the quantity demanded when the price decreases?

• It remains the same.

• It increases.

• It decreases.

• It fluctuates randomly.

Which of the following is NOT a reason for the downward sloping demand curve?

• Law of increasing marginal utility

• Substitution effect

• Income effect

• Law of diminishing marginal utility

What does the substitution effect imply?

• When the price of milk goes up, people buy the same amount of milk.

• When the price of milk goes down, people buy less milk.

• When the price of milk goes down, people buy more milk.

• When the price of milk goes up, people buy more milk.

What does the income effect suggest?

• When the price of milk goes up, people buy more milk.

• When the price of milk goes down, people buy less milk.

• When the price of milk goes down, people buy more milk.

• When the price of milk goes up, people buy the same amount of milk.

What is the law of diminishing marginal utility?

• The additional satisfaction from consuming more of a good increases.

• The additional satisfaction from consuming more of a good decreases.

• The total satisfaction from consuming more of a good remains constant.

• The total satisfaction from consuming more of a good increases.

What happens to the demand curve if a study shows milk causes baldness?

• It becomes steeper.

• It shifts to the left.

• It shifts to the right.

• It remains unchanged.

Which of the following is NOT a determinant of demand?

• Taste and preferences

• Number of consumers

• Price of related goods

• Supply of goods

What happens to the demand for milk if the price of almond milk increases?

• Demand for milk decreases.

• Demand for milk fluctuates.

• Demand for milk remains the same.

• Demand for milk increases.

How does an increase in income affect the demand for a normal good?

• Demand decreases.

• Demand remains the same.

• Demand fluctuates.

• Demand increases.