A Theory Asserts That Consumers Will Purchase Less of a Good

question 242

Multiple Choice

A theory asserts that consumers will purchase less of a good at higher prices than they will at lower prices. However, when the average price of cars increased throughout the 1990s, more cars were purchased. Which of the following explanations of the apparent conflict between theory and data is most accurate?

• A) The price and quantity data gathered by researchers was clearly measured incorrectly.
• B) It is likely that variables other than the price and quantity of cars demanded were changing.
• C) The ceteris paribus assumption is valid.
• D) The theory must be invalid.

---

Definitions:

Manufacturer

A company or individual engaged in the production of goods utilizing raw materials, components, or assemblies, often on a large scale.

Category Killer

A specialist that offers an extensive assortment in a particular category, so overwhelming the category that other retailers have difficulty competing.

Staples

Basic or essential goods that are widely used and regularly purchased, such as food, clothing, and hygiene products.

Very Specific Market Segments

Very Specific Market Segments target a narrowly defined, highly specialized portion of a broader market, focusing on particular consumer needs.