How does an increase in the price of an individual good or service affect a consumer optimum, and how does this help explain the law of demand?
What will be an ideal response?
Each person makes choices such that the marginal utility per dollar spent is equal for all goods consumed. If an item's price increases, an individual responds by reducing the quantity of that item demanded, which boosts the marginal utility of that item. Consequently, when the price of an item increases, the quantity of the item demanded declines, so the law of demand emerges.
You might also like to view...
U.S. dollar bills
A) are backed by gold. B) are backed by silver. C) are backed by platinum. D) are backed by uranium. E) are not backed by any precious metal.
Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above
Which of the following statements CORRECTLY categorizes the Nash equilibrium for the game? A) The game has a Nash equilibrium in which both optometrists advertise. B) The game has a Nash equilibrium in which both optometrists do not advertise. C) The game has a Nash equilibrium in which Dr. Smith advertises and Dr. Jones does not advertise. D) The game has a Nash equilibrium in which Dr. Smith does not advertise and Dr. Jones does advertise.
Considering only its direct effect on income, contractionary monetary policy tends to:
A. increase the exchange rate and decrease the trade deficit. B. be ambiguous with respect to the trade deficit but decrease the exchange rate. C. decrease the exchange rate and increase the trade deficit. D. be ambiguous with respect to the exchange rate but decrease the trade deficit.
Economists define the labor force to include
A) people who are working. B) only people who are working full time. C) people who are not working but are actively looking for a job, and people who are working. D) all individuals of working age, regardless of whether they are working or looking for a job.