When the Quantity Effect Outweighs the Price Effect

question 145

Multiple Choice

When the quantity effect outweighs the price effect:

• A) a price increase will cause a decrease in total revenue.
• B) a price increase will cause an increase in total revenue.
• C) a price decrease will cause a decrease in total revenue.
• D) None of these is true.

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Definitions:

Demand Curve

is a graphical representation that shows the relationship between the price of a good and the quantity of that good that consumers are willing to purchase.

Utility Maximization

The economic principle that individuals seek to obtain the greatest satisfaction or utility from their choices given their resources.

Marginal Utility

The additional satisfaction or usefulness gained from consuming one more unit of a good or service.

Income Effect

is the change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service.