Question

d. product market only 17. Which of the following is held constant along the demand curve? 4. price of the good CD quantity e income d. both a and b 18. What effect is working when the price of a good falls and consumers tend to buy it instead of other goods? a. the income effect. b. the substitution effect. c. the diminishing marginal utility effect. d. the ceteris paribus effect. 19. In response to news reports that taking aspirins daily can reduce an individual's risk of a heart attack, there will most likely be a. an increase in the supply of aspirins. b. a decrease in the supply of aspirins. C. an increase in the demand for aspirins. d. an increase in the quantity demanded of aspirins. 20. During an economie downturn when consume income falls, the demand for ice cream increases and the demand for chocolate cake decreases. This implies that a. ice cream and chocolate cake are complements. b. ice cream is a normal good and chocolate cake is an inferior good. C. ice cream 18 an interior good and chocolate cake 18 a normal good.

18) 19) 20) please all of them

Answer 1

Answer

17. c. Income

Among the given options, income is held constant along the demand curve. The demand curve shows the relationship between the price of a commodity and the quantity demanded of the commodity. So along the demand curve, we observe the movement of price and quantity demanded of a commodity. The other factors except the price of the commodity, that affect the demand for a commodity are held constant along the demand curve. The income is one of these factors that affect the demand for a commodity. So along the demand curve, the income is held constant.

__________________________________________________________________

18. b. The substitution effect.

The substitution effect occurs for a change in the relative price of the goods. Let us assume, that a consumer buys a good that has substitute in the market, Now, if the price of the substitute good falls, it becomes cheaper relative to the good, the consumer buys, whose price remains unchanged. So the consumer will then start to buy the good whose price has fallen for the decrease in relative price, i.e., the consumer substitutes one good for another.

__________________________________________________________________

19. c. An increase in the demand for aspirins.

Here, the news report will change people's preferences. As the report says that taking aspirins daily can reduce an individual's risk of a heart attack, people's preferences for aspirins will increase, and thus the demand for aspirins will rise at the prevailing price level. So, there will be an increase in the demand for aspirins.

____________________________________________________________________

20. c. Ice-cream is an inferior good and chocolate cake is a normal good.

The inferior good is a good whose quantity demanded moves in the opposite direction of the income, and normal good is a good whose quantity demanded moves in the same direction of the income.

Here, we see that consumer income falls due to the economic downturn, and as a result, the demand for ice-cream increases while the demand for chocolate cake decreases, i.e, the demand for ice-cream moves in the opposite direction of the income, and the demand for chocolate cake moves in the same direction of the income. Hence, we conclude that ice-cream is an inferior good and chocolate cake is a normal good.

____________________________________________________________________