Economics Topic 3

What does the law of demand state?

• As price increases, demand increases.

• As price decreases, demand decreases.

• As price increases, demand decreases.

• Price and demand are unrelated.

What is the substitution effect?

• The change in demand due to a change in income.

• The change in demand due to a change in the price of a related good.

• The change in demand due to a change in consumer preferences.

• The change in demand due to a change in the price of the good itself.

What does elasticity of demand measure?

• The change in demand due to a change in consumer income.

• The change in demand due to a change in the price of the good.

• The change in supply due to a change in production costs.

• The change in supply due to a change in technology.

What is the term used for business income?

• Revenue

• Profit

• Cost

• Expense

How does market size affect demand?

• Larger market size decreases demand.

• Larger market size increases demand.

• Market size has no effect on demand.

• Smaller market size increases demand.

What role do fads play in demand for goods?

• Fads decrease demand temporarily.

• Fads have no effect on demand.

• Fads increase demand temporarily.

• Fads permanently increase demand.

An increase in demand would shift the demand curve in what direction?

• To the left

• To the right

• Upward

• Downward

What does the law of supply state?

• As price increases, supply decreases.

• As price decreases, supply increases.

• As price increases, supply increases.

• Price and supply are unrelated.

The supply curve illustrates that when price goes up, what happens to the quantity supplied?

• Quantity supplied decreases.

• Quantity supplied increases.

• Quantity supplied remains constant.

• Quantity supplied becomes zero.

How does technology affect supply?

• Technology decreases supply.

• Technology has no effect on supply.

• Technology increases supply.

• Technology makes supply unpredictable.