APECON1 Lesson 2

What happens to the demand for milk if the price of a substitute falls?

• The demand for milk increases and shifts to the right.

• The demand for milk decreases and shifts to the left.

• The quantity demanded for milk increases, moving along the curve.

• The quantity demanded for milk decreases, moving along the curve.

What happens to the supply of milk if the price of milking machines increases?

• The supply of milk increases and shifts to the right.

• The supply of milk decreases and shifts to the left.

• The quantity supplied for milk increases, moving along the curve.

• The quantity supplied for milk decreases, moving along the curve.

What does it mean if the Price Elasticity of Demand (PED) for a product is greater than 1?

• Consumers are not very responsive to price changes.

• A small change in price leads to a smaller change in quantity demanded.

• Demand is elastic, meaning consumers are highly responsive to price changes.

• The percentage change in quantity demanded is equal to the percentage change in price.

According to the Total Revenue Test, what happens to total revenue if the price of a product with elastic demand decreases?

• Total revenue decreases.

• Total revenue increases.

• Total revenue remains unchanged.

• Total revenue fluctuates unpredictably.

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