Supply & Demand Vocabulary Quiz

1. If income and demand go in different directions (one goes up, while the other goes down), the good is called a (n) _________

Normal Good

Inferior Good

Neutral Good

When income and demand go in different directions, it means that as income increases, the demand for the good decreases. This indicates that the good is a lower-quality or cheaper alternative compared to other goods available in the market. Therefore, the correct answer is "Inferior Good."

Explanation

When income and demand go in different directions, it means that as income increases, the demand for the good decreases. This indicates that the good is a lower-quality or cheaper alternative compared to other goods available in the market. Therefore, the correct answer is "Inferior Good."

2. Two goods are considered _________ when theyare consumed together.

Complements

Substitutes

Normal Goods

When two goods are considered complements, it means that they are consumed together. Complementary goods are often used in conjunction with each other, such as peanut butter and jelly or shampoo and conditioner. The consumption of one good enhances the consumption of the other, and they are seen as being mutually beneficial.

Explanation

When two goods are considered complements, it means that they are consumed together. Complementary goods are often used in conjunction with each other, such as peanut butter and jelly or shampoo and conditioner. The consumption of one good enhances the consumption of the other, and they are seen as being mutually beneficial.

3. An example of _________ would be, if the price of coffee increases, the demand for tea increases.

Complements

Substitutes

Inferior Goods

Substitutes are goods that can be used as alternatives to each other. In this example, when the price of coffee increases, people may choose to buy tea instead, as it is a similar beverage that can fulfill their caffeine needs. This shows that the increase in the price of one good (coffee) leads to an increase in the demand for its substitute (tea).

Explanation

Substitutes are goods that can be used as alternatives to each other. In this example, when the price of coffee increases, people may choose to buy tea instead, as it is a similar beverage that can fulfill their caffeine needs. This shows that the increase in the price of one good (coffee) leads to an increase in the demand for its substitute (tea).

4. This law states that, as the price of a good increases, the quantity demanded decreases.

Law of Inelasticity

Law of Supply & Demand

Law of Consuming

The correct answer is "Law of Supply & Demand." This law states that as the price of a good increases, the quantity demanded decreases. It is a fundamental principle in economics that explains the relationship between the availability of a product (supply) and the desire for that product (demand). When the price of a good increases, consumers are less willing or able to purchase it, leading to a decrease in demand. This law helps to explain how prices are determined in a market economy.

Explanation

The correct answer is "Law of Supply & Demand." This law states that as the price of a good increases, the quantity demanded decreases. It is a fundamental principle in economics that explains the relationship between the availability of a product (supply) and the desire for that product (demand). When the price of a good increases, consumers are less willing or able to purchase it, leading to a decrease in demand. This law helps to explain how prices are determined in a market economy.

5. If a person's income and demand change in the same direction (both go up or both go down) then the good is called a (n) ________

Normal Good

Inferior Good

Neutral Good

If a person's income and demand change in the same direction (both go up or both go down), the good is called a normal good. This means that as a person's income increases, their demand for the good also increases, and vice versa.

Explanation

If a person's income and demand change in the same direction (both go up or both go down), the good is called a normal good. This means that as a person's income increases, their demand for the good also increases, and vice versa.

6. If a person buys the same amount of the good when income changes, the good is called a (n) ____________

Inferior Good

Normal Good

Neutral Good

If a person buys the same amount of a good when their income changes, it suggests that their demand for the good is not affected by changes in income. This indicates that the good is a neutral good, meaning that it is neither inferior (where demand decreases as income increases) nor normal (where demand increases as income increases).

Explanation

If a person buys the same amount of a good when their income changes, it suggests that their demand for the good is not affected by changes in income. This indicates that the good is a neutral good, meaning that it is neither inferior (where demand decreases as income increases) nor normal (where demand increases as income increases).