Supply & Demand

What two conditions must be met for demand to exist?

• Willingness to buy and high income

• Ability to buy and low prices

• Willingness to buy and ability to buy

• High demand and low supply

In a demand graph, where is the quantity typically located?

• On the Vertical axis

• On the Horizontal axis

• In the center of the graph

• Above the graph

What is one of the economic concepts that describe how consumers react to changes in price by replacing more expensive items with less costly alternatives?

• Substitution Effect

• Inflation Rate

• Price Ceiling

• Budget Deficit

Which concept explains the decrease in additional satisfaction or utility as more units of a product are consumed?

• Diminishing Marginal Utility

• Law of Supply

• Price Elasticity

• Opportunity Cost

What is the term used to describe the amount of money people have available to spend on goods and services?

• Income Effect

• Purchasing Power

• Demand

• Supply

What is the Income Effect?

• A decrease in consumer spending due to higher prices

• An increase in consumer spending due to a change in income

• A change in consumer preferences

• A decrease in consumer income

What is the main difference between goods that are wanted and goods that are needed according to the Income Effect and Substitution Effect?

• Wanted goods are always cheaper than needed goods.

• Needed goods will still be purchased regardless of price.

• Wanted goods have no substitutes.

• Needed goods are always luxury items.

What does "price" refer to in the context of consumer goods?

• The amount a producer pays to make a product

• The amount a consumer pays to bring an item home

• The cost of raw materials

• The profit margin of a product

What does "cost" refer to in the context of producing goods?

• The selling price of a product

• The amount a consumer pays to bring an item home

• The amount a producer paid to make the good/service and get it to the market

• The discount offered on a product

Why might the price and cost of luxury items differ significantly?

• Luxury items are made with cheaper materials

• Producers do not aim to make a profit on luxury items

• Luxury items often have a high markup, leading to a higher price than cost

• The cost of luxury items is always higher than the price