When the Term "Price" Is Used in the Law of Demand

question 225

Multiple Choice

When the term "price" is used in the law of demand, price refers to

• A) the dollar price of the good.
• B) the price of the good relative to the price of another good.
• C) the absolute price of the good.
• D) the nominal price of the good relative to its nominal price in the previous year.

Apply the concept of marginal utility to real-world product consumption decisions for maximization of total utility.

Analyze how changes in income and prices affect consumer choices and utility maximization.

Grasp the underlying assumptions of the theory of consumer behavior, including utility maximization.

Identify and describe the income effect, substitution effect, and diminishing marginal utility, and their implications for demand curves.

---

Definitions:

Fixed Cost

An expense that remains constant regardless of the volume of products or services manufactured or distributed.

Relevant Range

The range of activity within which assumptions about variable and fixed cost behavior are valid.

Volume of Activity

Refers to the level of operations or the amount of output produced or services rendered in a certain period.

Fixed Cost

Costs that remain constant in total regardless of changes in the level of activity or volume of production.