Future Business Leaders of America (FBLA) Agribusiness Practice Test

What refers to the relationship between price and quantity that illustrates consumer willingness to purchase at various prices?

1. Diminishing Marginal Utility

2. Demand

3. Equilibrium Price

4. Economic Principles

The correct answer is: Demand

The concept that refers to the relationship between price and quantity, illustrating consumer willingness to purchase at various prices, is demand. Demand is essentially a fundamental economic principle that demonstrates how much of a good or service consumers are willing and able to buy at different price levels. When prices decrease, the quantity demanded typically increases, as consumers find the product more attractive or affordable. Conversely, when prices rise, the quantity demanded generally decreases, as consumers may seek alternatives or decide that the item is no longer worth the higher price. This relationship is often represented graphically with a downward-sloping demand curve on a price-quantity graph. Understanding demand is crucial for businesses as it helps them to set prices that maximize sales and manage inventory effectively. In contrast, the other options refer to different economic concepts that do not encompass the specific relationship between price and quantity demanded. Diminishing Marginal Utility addresses how the satisfaction derived from consuming additional units may decrease, equilibrium price is where supply and demand meet, and economic principles cover a broad range of foundational concepts that inform economic behavior but do not specifically define the relationship between price and quantity in the context of consumer behavior.