Mankiw Chapter 4 Yoda Quiz

A competitive market is a market in which there are many buyers and many sellers, resulting in each participant having a negligible impact on the market. In a competitive market, no single buyer or seller has the power to influence prices or market conditions. This type of market is characterized by low barriers to entry, free competition, and a wide range of product choices for consumers.

The law of demand states that there is an inverse relationship between the price of a good and the quantity demanded. This means that as the price of a good increases, the quantity demanded decreases, and vice versa. The law of demand is a fundamental concept in economics and helps explain consumer behavior in the market.

If an increase in the price of A Product leads to a decrease in the quantity demanded for B Product, it suggests that these two products are complements. Complementary goods are those that are typically consumed together or used in conjunction with each other. In this case, the decrease in quantity demanded for B Product indicates that it is dependent on the demand for A Product.

The price of a product is not a factor that shifts the demand curve. The demand curve represents the relationship between the price of a product and the quantity demanded. Factors such as taste, income, expectations, and prices of related goods can influence the demand for a product and cause the demand curve to shift. However, changes in price result in movements along the demand curve, not shifts.

The given answer correctly states that when prices fall, quantity demanded will also fall. This is a characteristic of an upward-sloping curve, known as the law of demand. According to this law, as the price of a good or service decreases, consumers are willing and able to purchase more of it. This inverse relationship between price and quantity demanded is a fundamental principle in economics and is represented by an upward-sloping demand curve.