Explain the Law of Demand
What will be an ideal response?
The law of demand is the rule that, holding everything else constant, when the price of a product falls, the quantity of the product demanded will increase, and when the price of a product rises, the quantity of the product demanded will decrease.
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If the typical firm in a perfectly competitive market was depicted in the graph below, what would be most likely to occur?
A. New firms would be likely to enter, increasing the market price. B. New firms would be likely to enter, decreasing the market price. C. Existing firms would be likely to exit, increasing the market price. D. Existing firms would be likely to exit, decreasing the market price.
Which of the following statements about market failure is not true:
A. Market failure causes an inefficient allocation of resources, even in a competitive market B. Market failure can come from causes on the demand-side or the supply-side of a market C. Market failure always results from some government action or policy in a market D. Market failure can result from the number of sellers in a market being too few to ensure competition