The Demand Curve for a Normal Good Will Always Slope

question 23

Multiple Choice

The demand curve for a normal good will always slope downward because:

• A)the substitution effect and the income effect reinforce each other,and the substitution effect always displays an inverse relation between price and quantity demanded.
• B)the substitution effect and the income effect reinforce each other,and the income effect always displays an inverse relation between price and quantity demanded.
• C)even though the substitution effect and the income effect move in opposite directions,the substitution effect dominates,and it always displays an inverse relation between price and quantity demanded.
• D)even though the substitution effect and the income effect move in opposite directions,the income effect dominates,and it always displays an inverse relation between price and quantity demanded.

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Definitions:

Advertising

The action of calling public attention to products, services, needs, etc., especially by paid announcements in newspapers and magazines, over the radio or television, on billboards, etc.

Long-run Equilibrium

The state in which all inputs are variable, allowing firms to make adjustments and the market to clear.

Efficient Scale

The level of production at which average total costs are minimized.

Elasticity Of Demand

Elasticity of demand measures how the quantity demanded of a good changes in response to changes in its price.