A Change in Prices Not the Result of Product Improvement

question 44

Multiple Choice

A change in prices not the result of product improvement is called inflation and is generally considered to be a negative economic development,but:

• A)downward changes in prices,or deflation,is a positive economic development and can offset inflation.
• B)inflation is not uniform across all product categories,so inflation may negatively affect only certain product categories.
• C)inflation generally does not last long and is self-correcting,so monetary authorities do not consider inflation to be a concern for currency values.
• D)but inflation affects all product categories,so prices of products relative to each other do not change.

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Definitions:

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded by consumers over a period of time.

Consumer Surplus

The difference between the maximum price consumers are willing to pay and the price they actually pay. It is the net gain derived by the buyers of the good.

Cell-Phone Service

A service provided by telecommunications companies that enables mobile phone users to make and receive calls, texts, and use data.

Utility-Maximizing

A behavioral principle where consumers allocate their income to purchase a mix of goods and services that provides the highest overall utility.