Supply and Demand - Module 2

According to the law of diminishing marginal utility:

Each additional unit of a good consumed yields less additional utility.

T or F: Whenever the marginal product decreases, the marginal cost of production is also increasing.

False

Price elasticity of supply can be found by

Percentage change in quantity supplied divided by the percentage change in price.

Utility refers to the _____.

Satisfaction obtained from a good or service

T or F: In the long run, producers can be more flexible and therefore, price elasticity of supply is more elastic.

True

The law of diminishing returns happens when each additional unit of a variable input results in

a decline in Marginal Physical Product (MPP).

Which of the following influences the price elasticity of demand?

amount of time available to adjust to price changes number and availability of substitutes percentage of a consumer's budget (all of the above)

In the short run, if we continue to add workers to other fixed factors of production, we will eventually experience ___________.

diminishing returns.

Price elasticity of demand shows

how responsive consumers are to price changes.

Price elasticity of supply shows _____

how responsive producers are to price changes.

According to the law of demand, the quantity demanded of a good in a given time period :

increases as its price goes down.

A leftward shift of the supply curve for widgets, ceteris paribus, will cause equilibrium price to ________________________. (hint: on this kind of question, drawing the graph and then the shift in the supply curve can help you to answer the question)

rise and equilibrium quantity to fall.

Ceteris paribus, which of the following is most likely to cause a decrease in the supply of strawberries?

some strawberry producers leave the market and begin producing kiwi.

A shift in the supply curve reflects a change in _____.

supply.