Question

discussion question 03-01
a. which statement is consistent with the law of demand?
an increase in market price will lead to an increase in quantity demanded.
a reduction in market price will lead to a decrease in quantity demanded.
a reduction in market price will lead to an increase in quantity demanded
at a zero price, quantity demanded will be equal to zero.
b. which of the following characteristics lead to a downward - sloping demand curve?
instructions: in order to receive full credit, you must make a selection for each option. for correct answer(s), click the box once to place a check mark. for incorrect answer(s), click the option twice to empty the box
diminishing preferences for a particular good
an increase in purchasing power as market price decreases
diminishing marginal utility
increasing marginal benefits
increasing opportunity costs
a decline in the price of a related good

Explanation:

Part a:

The law of demand states that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity demanded of that good. This means as price falls, quantity demanded rises, and vice versa.

Part b:

• Diminishing marginal utility: As more of a good is consumed, each additional unit provides less satisfaction, so consumers will only buy more if the price is lower, leading to a downward-sloping curve.
• Increase in purchasing power as price falls: A lower price means consumers can buy more of the good with their existing income, increasing quantity demanded at lower prices.
• Increasing opportunity costs: As consumers buy more of a good, they forgo more of other goods they value, so they require lower prices to justify buying additional units.

The other options do not explain the downward-sloping demand curve: diminishing preferences is not a standard economic driver, increasing marginal benefit would lead to an upward-sloping curve, and a price change of a related good shifts the demand curve rather than explaining its slope.

Answer:

a. A reduction in market price will lead to an increase in quantity demanded.
b.

• An increase in purchasing power as market price decreases
• Diminishing marginal utility
• Increasing opportunity costs