The Inverse Relationship Between Quantity Demanded and Price of a Good

question 305

Multiple Choice

The inverse relationship between quantity demanded and price of a good or service can be explained, in part, by

• A) a shift in the demand curve.
• B) diminishing marginal utility only.
• C) diminishing marginal utility and the rule of equal marginal utilities per dollar.
• D) the real income effect.

---

Definitions:

Equilibrium

When aggregate demand equals aggregate supply.

MC = MR

A principle in economics stating that profit maximization occurs when a firm's marginal cost (MC) equals its marginal revenue (MR).

Marginal Revenue

The additional income gained from selling one more unit of a good or service.

Marginal Revenue

The extra revenue earned by selling an additional unit of a product or service.