Praxis 5004 Practice Test Practice Question
A new television series increases the popularity of a certain type of hat. Which of the following economic concepts is used to explain the resulting increase in the price of the hat?
Correct Answer: A
Rationale: The Law of Demand explains how an increase in the popularity of a product, like a hat, leads to higher demand. As more people want the hat, sellers can raise prices due to this increased interest.
Comparative advantage (B) relates to the ability of a party to produce goods at a lower opportunity cost, which does not directly explain price changes due to demand shifts.
Opportunity cost (C) refers to the value of the next best alternative forgone when making a choice, not directly linked to price increases from demand surges.
The multiplier effect (D) pertains to economic stimulation from spending, which is not relevant to the specific situation of increased hat prices due to popularity.
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