Question 1

If the demand for a product increases when the price falls the demand curve would be ___________ sloping.

Accepted Answer

downward

Question 2

Demand measures the quantity customers are willing and ______ to purchase

Accepted Answer

able

Question 3

A combination of high price and high product benefits is called a differentiation strategy by Bowman

Accepted Answer

Bowman's Strategy Clock model includes a differentiation strategy, which is characterized by offering high product benefits at a high price, aiming to provide unique value that justifies the premium pricing.

Question 4

A fall in price leads to an outward shift in a demand curve

Accepted Answer

A fall in price leads to a movement along the demand curve, not an outward shift. An outward shift in the demand curve indicates an increase in demand at all price levels, not a change in quantity demanded due to a price change.

Question 5

The price elasticity of demand measures whether demand increases or decreases when the price falls

Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good, not whether demand increases or decreases.

Question 6

When demand is price inelastic, a price increase will also increase total revenue.

Accepted Answer

When demand is price inelastic, it means that the percentage change in quantity demanded is less than the percentage change in price. Therefore, when prices increase, the decrease in quantity demanded is relatively small, leading to an increase in total revenue.

Question 7

An increase in costs mean the demand curve will shifts.

Accepted Answer

An increase in costs affects the supply side of the market, leading to a shift in the supply curve, not the demand curve. Demand curves shift due to changes in consumer preferences, income, prices of related goods, and other factors affecting consumer demand, not costs of production.

Question 8

An increase in demand is shown by a movement along the demand curve.

Accepted Answer

An increase in demand is shown by a shift of the demand curve to the right, not by a movement along the demand curve. A movement along the demand curve indicates a change in the quantity demanded due to a change in price.

Question 9

A shift in the demand curve may occur for all of the following except a change in
A) price
B) income
C) The price of complements
D) The price of substitutes

Accepted Answer

A shift in the demand curve is caused by factors other than the price of the good itself, such as changes in income, prices of complements, and prices of substitutes. A change in the price of the good results in a movement along the demand curve, not a shift of the curve.

Question 10

Complete the sentence. The demand curve will shift inwards if…
A) Supply falls.
B) The good is inferior and income rises.
C) The price rises.
D) The good is normal and an income increases.

Accepted Answer

The demand for an inferior good decreases when income rises, causing the demand curve to shift inwards.

Question 11

What does it tell you if the income elasticity for your product is -0.5?
A) The product is inferior and an increase in income by 10% reduces demand by 5%.
B) The product is inferior and an increase in income by 10% increases demand by 50%.
C) The product is normal and an increase in income by 10% reduces demand by 5%.
D) The product is normal and an increase in income by 10% increases demand by 50%.

Accepted Answer

An income elasticity of -0.5 indicates that the product is inferior because the elasticity is negative, meaning demand decreases as income increases. Specifically, a 10% increase in income leads to a 5% reduction in demand for the product.

Question 12

What does it tell you if the cross price elasticity of demand between two products is +2?
A) The products are substitutes and a price increase in one by 3% decreases demand for the other by 1.5%.
B) The products are complements and a price increase in one by 3% decreases demand for the other by 1.5%.
C) The products are complements and a price increase in one by 3% decreases demand for the other by 6%.
D) The products are substitutes and a price increase in one by 3% increases demand for the other by 6%.

Accepted Answer

A positive cross price elasticity of demand indicates that the two products are substitutes. A value of +2 means that a 1% increase in the price of one product leads to a 2% increase in the demand for the other product. Therefore, a 3% price increase would increase demand for the other product by 6%.

Question 13

What does a demand curve show?
A) What people are willing and able to buy at each income, all other things unchanged.
B) What people are willing and able to buy at each and every price, all other things unchanged.
C) What people like, all other things unchanged.
D) What people can afford, all other things unchanged.

Accepted Answer

The demand curve illustrates the quantity of a good that people are willing and able to purchase at various prices, assuming all other factors remain constant. This relationship between price and quantity demanded is fundamental in economics, showing how changes in price lead to changes in the quantity demanded.

Question 14

What does it tell you if demand is price elastic?
A) A price decrease increases revenue.
B) The percentage change in quantity demand is less than the change in price.
C) The value of price elasticity is less than 1.
D) There are likely to be few substitutes.

Accepted Answer

When demand is price elastic, a decrease in price leads to a proportionally larger increase in the quantity demanded, thereby increasing total revenue. This is because the percentage change in quantity demanded is greater than the percentage change in price.

Question 15

What can cause a change in quantity demanded?
A) A change in income.
B) A change in price.
C) A change in advertising.
D) A change in the number of buyers.

Accepted Answer

A change in price directly affects the quantity demanded of a good or service, according to the law of demand, which states that, all else being equal, as the price of a good increases, the quantity demanded of that good decreases, and vice versa. Changes in income, advertising, and the number of buyers are factors that shift the demand curve, affecting demand, but not the quantity demanded at a specific price.

Question 16

When might a demand curve for a normal good shift outwards?
A) When the price of the product falls.
B) When income falls.
C) When the price of a complement falls.
D) When supply increases.

Accepted Answer

A demand curve for a normal good shifts outwards when the price of a complement falls, as it makes the normal good more attractive to consumers, increasing demand.

Question 17

What does it tell you if demand is price inelastic?
A) The change in quantity demanded is less than the price change in percentages.
B) Demand does not change when price changes.
C) Revenue falls when price increases.
D) There are many producers.

Accepted Answer

When demand is price inelastic, it means that the percentage change in quantity demanded is less than the percentage change in price, indicating consumers are less responsive to price changes for that good or service.

Question 18

If the demand for a product increases when the price of another one rises they are known as ___________.

Accepted Answer

The answer of If the demand for a product increases...

Quiz 3: Managing Demand

If the demand for a product increases when the price falls the demand curve would be ___________ sloping.

Demand measures the quantity customers are willing and ______ to purchase

A combination of high price and high product benefits is called a differentiation strategy by Bowman

A fall in price leads to an outward shift in a demand curve

The price elasticity of demand measures whether demand increases or decreases when the price falls

When demand is price inelastic, a price increase will also increase total revenue.

An increase in costs mean the demand curve will shifts.

An increase in demand is shown by a movement along the demand curve.

A shift in the demand curve may occur for all of the following except a change in

Complete the sentence. The demand curve will shift inwards if…

What does it tell you if the income elasticity for your product is -0.5?

What does it tell you if the cross price elasticity of demand between two products is +2?

What does a demand curve show?

What does it tell you if demand is price elastic?

What can cause a change in quantity demanded?

When might a demand curve for a normal good shift outwards?

What does it tell you if demand is price inelastic?

If the demand for a product increases when the price of another one rises they are known as ___________.