Suppose the Demand for Furniture Remains Constant

question 15

Multiple Choice

Suppose the demand for furniture remains constant. If there is a decrease in the cost of wood used to make furniture, _____.

• A) the equilibrium price of furniture will increase while the equilibrium quantity will decrease
• B) the equilibrium price of furniture will fall while the equilibrium quantity will increase
• C) the equilibrium price and quantity of furniture will fall
• D) the equilibrium price and quantity of furniture will increase

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Definitions:

Risk Neutral

A description of an individual or entity that does not show a preference for risk, valuing all investments purely by their expected return without concern for their risk.

Risk Averse

A description of an individual or entity that prefers outcomes with lower uncertainty and is less likely to engage in actions with uncertain outcomes.

Income

The money or earnings received by an individual or organization, often from employment, business, investments, or other sources.

Utility Function

A mathematical representation of how a set of goods and services (or choices) are ranked according to their usefulness to a person.