Economics Quiz Chapter 3

If there is an increase in the demand curve (D2), it means that the quantity demanded at each price level has increased. This results in a shift of the demand curve to the right, indicating a higher demand for the product. Conversely, if there is a decrease in the demand curve (D3), it means that the quantity demanded at each price level has decreased. This leads to a shift of the demand curve to the left, indicating a lower demand for the product. Therefore, the statement is true.

The explanation for the given correct answer is that the law of demand is a fundamental principle in economics that states there is an inverse relationship between the price of a good and the quantity demanded. When the price of a good increases, consumers are less willing and able to purchase it, resulting in a decrease in the quantity demanded. Conversely, when the price of a good decreases, consumers are more willing and able to purchase it, leading to an increase in the quantity demanded. This relationship is based on the assumption of ceteris paribus, where all other factors influencing demand remain constant.

Diminishing marginal utility refers to the concept that the satisfaction or utility derived from consuming each additional unit of a good or service decreases as the quantity consumed increases. This is because as we consume more of a good, the marginal benefit or satisfaction we get from each additional unit decreases. In this context, the answer choice "The satisfaction received from consuming each additional unit, as that unit's price declines" best explains the concept of diminishing marginal utility. It highlights that as the price of each unit decreases, the satisfaction or utility derived from consuming each additional unit diminishes.

Consumer demand for generic products is an example of the substitution effect at work. Generic products are non-brand name products. The substitution effect refers to the tendency of consumers to switch to a cheaper alternative when the price of a product increases. In this case, consumers are choosing generic products instead of brand name products because they are typically cheaper. This demonstrates how consumer preferences can change based on price and the availability of substitutes.

The correct answer is "Mock, Turtles". In the section under Consumer Tastes and Preferences, the musical group mentioned is Mock Turtles. They were discussing the concept of demand curve and how it can affect the shifting of prices.

The statement is false because the demand curve is a graph that is plotted, while the demand schedule is a chart that lists the quantity demanded at different price levels. The demand curve shows the relationship between price and quantity demanded, while the demand schedule provides specific numerical data on the quantity demanded at different prices.

An income effect occurs when a change in price leads to a change in purchasing power. In the case of the first example, if the price of a CD is lowered from $15 to $10, it means that the consumer's purchasing power has increased. They can now buy more CDs with the same amount of money. Similarly, if the price of a CD increases from $15 to $18, the consumer's purchasing power decreases, resulting in an income effect. Lastly, if someone is promoted and receives a raise of $1000 per week, their purchasing power increases, leading to an income effect.