#1
Which of the following best describes the law of demand?
As the price of a good increases, the quantity demanded decreases.
ExplanationInverse relationship between price and quantity demanded.
#2
What is likely to happen to the quantity demanded of a product if its price decreases?
The quantity demanded increases.
ExplanationPrice decrease leads to increased demand.
#3
Which of the following is an example of a complementary good?
Peanut butter and jelly
ExplanationGoods consumed together, enhancing each other's demand.
#4
If a good is considered a normal good, what happens to the quantity demanded when income increases?
Quantity demanded increases.
ExplanationPositive relationship between income and demand for normal goods.
#5
Which of the following is NOT a determinant of demand?
Price of inputs
ExplanationInput prices do not directly affect consumer demand.
#6
Which of the following factors can cause a shift in the demand curve?
Change in consumer preferences
ExplanationShift due to changes in consumer choice.
#7
Which of the following factors does NOT influence consumer demand?
Number of firms producing the product
ExplanationProduction-related factor unrelated to consumer demand.
#8
What is the income effect in relation to the law of demand?
When a change in price affects the purchasing power of a consumer's income.
ExplanationImpact of price change on consumer's purchasing power.
#9
What does the cross elasticity of demand measure?
The responsiveness of quantity demanded to a change in the price of a substitute good.
ExplanationMeasurement of responsiveness to substitute price changes.
#10
Which of the following factors would NOT shift the demand curve for a product?
Changes in the price of the product
ExplanationPrice change doesn't shift the demand curve.
#11
What happens to the demand for a product when there is a decrease in the price of its substitute?
Demand increases
ExplanationInverse relationship with substitute price changes.
#12
What is the main assumption underlying the law of demand?
Consumers act rationally to maximize utility.
ExplanationRational consumer behavior assumption.
#13
What happens to the demand curve for a normal good when consumer income decreases?
It shifts to the left.
ExplanationNegative shift in demand curve with income decrease.
#14
What is the primary reason for the law of demand?
Substitution effect
ExplanationChange in preference due to price changes.
#15
What happens to the demand for a product if there is an increase in consumer income for a normal good?
Demand increases
ExplanationPositive relationship with consumer income for normal goods.
#16
What type of good is characterized by an increase in demand as consumer income decreases?
Inferior good
ExplanationGoods with negative income elasticity.
#17
Which of the following is a characteristic of an inelastic demand curve?
Vertical slope
ExplanationSmall responsiveness, depicted with a vertical curve.
#18
What is the term used to describe a good for which the demand decreases as consumer income increases?
Inferior good
ExplanationNegative income elasticity for these goods.
#19
Which of the following is NOT a reason for the downward slope of the demand curve?
Engel's Law
ExplanationEngel's Law is not a factor influencing the demand curve.
#20
If the demand for good X is perfectly elastic, what does this imply about the price elasticity of demand?
Price elasticity of demand is infinite.
ExplanationExtremely responsive demand to price changes.
#21
What is the relationship between price elasticity of demand and total revenue?
They move in opposite directions.
ExplanationInverse relationship between elasticity and revenue.
#22
If the price of a product increases and its demand remains constant, what is the price elasticity of demand?
Perfectly inelastic
ExplanationNo change in demand despite price increase.
#23
If the cross elasticity of demand for two goods is positive, what can be said about their relationship?
They are substitutes
ExplanationPositive relationship indicates substitute goods.
#24
If the price of a product increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?
0.5
ExplanationElasticity calculated as percentage change in quantity over price.
#25
What does a perfectly elastic demand curve look like?
Horizontal line
ExplanationInfinitely responsive demand, depicted with a horizontal line.