ECONOMICS
CONSUMERS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Good X becomes relatively less expensive than its substitutes, so consumers buy more of good X and fewer of the substitutes
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The marginal utility of consuming good X increases as more of good X is consumed
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The lower price of good X decreases the marginal utility per dollar; therefore, consumers buy more of good X
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The demand curve for good X shifts to the left
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Detailed explanation-1: -Answer and Explanation: The correct answer is, a. Good X becomes relatively less expensive than its substitutes, so consumers buy more of good X and fewer of the substitutes.
Detailed explanation-2: -Demand:Which of the following explains why a decrease in the price of a normal good will lead to an increase in the quantity demanded of the good? (A)A lower price will increase consumers’ purchasing power.
Detailed explanation-3: -The correct option is: D. Total benefit decreases at an increasing rate as consumption increases. Demand curve is downward sloping because of the diminishing marginal utility.
Detailed explanation-4: -Changes in the price of related goods: The demand for good X may be changed by increases or decreases in the prices of other, related goods. These related goods are usually divided into two categories called substitutes and complements.
Detailed explanation-5: -When the price of a normal good falls, there are two identifying effects: The substitution effect contributes to an increase in the quantity demanded because consumers substitute more of the good for other goods. The reduction in price increases the consumer’s ability to buy goods.