EconomicsMr. Bordelon

Demand Review

Multiple Choice1. The law of demand says

A. the higher the price, the more consumers will buy.B. the lower the price, the less consumers will buy.C. the lower the price, the more consumers will buy.D. the lower the price, the more consumers will substitute.

Multiple Choice1. The law of demand says

A. the higher the price, the more consumers will buy.B. the lower the price, the less consumers will buy.C. the lower the price, the more consumers will buy.D. the lower the price, the more consumers will substitute.

Multiple Choice2. A drop in price will

A. increase the demand for goods.B. decrease the demand for goods.C. not affect the demand for goods.D. not affect the law of demand.

Multiple Choice2. A drop in price will

A. increase the demand for goods.B. decrease the demand for goods.C. not affect the demand for goods.D. not affect the law of demand.

Multiple Choice3. Which of the following describes the

substitution effect?A. As the price of a good falls, people will substitute other products.B. As the price of a good rises, people will substitute other products.C. As demand rises, people will substitute other products.D. As demand falls, people will substitute other products.

Multiple Choice3. Which of the following describes the

substitution effect?A. As the price of a good falls, people will substitute other products.B. As the price of a good rises, people will substitute other products.C. As demand rises, people will substitute other products.D. As demand falls, people will substitute other products.

Multiple Choice4. A demand curve illustrates

A. the differences in price charged by different stores.B. the quantities demanded at each price by consumers.C. the differences in demand for different products.D. the products which are most in demand.

Multiple Choice4. A demand curve illustrates

A. the differences in price charged by different stores.B. the quantities demanded at each price by consumers.C. the differences in demand for different products.D. the products which are most in demand.

Multiple Choice5. For most goods, a rise in people’s income

means that there will beA. a substitution effect.B. a rise in prices.C. an increase in demand.D. a decrease in demand.

Multiple Choice5. For most goods, a rise in people’s income

means that there will beA. a substitution effect.B. a rise in prices.C. an increase in demand.D. a decrease in demand.

Multiple Choice6. Which of the following is NOT an example

of complements?A. skis and ski bootsB. row boat and oarsC. electric shaver and charging cordD. calculator and cell phone

Multiple Choice6. Which of the following is NOT an example

of complements?A. skis and ski bootsB. row boat and oarsC. electric shaver and charging cordD. calculator and cell phone

Multiple Choice7. Substitutes are

A. goods that are bought and used together.B. goods used in place of one another.C. goods that cannot be replaced.D. goods which cause a shift in the demand curve.

Multiple Choice7. Substitutes are

A. goods that are bought and used together.B. goods used in place of one another.C. goods that cannot be replaced.D. goods which cause a shift in the demand curve.

Multiple Choice8. If you keep buying despite a price

increase, your demand isA. elastic.B. strong.C. normal.D. inelastic.

Multiple Choice8. If you keep buying despite a price

increase, your demand isA. elastic.B. strong.C. normal.D. inelastic.

Multiple Choice9. Which of the following is an example of a

good with inelastic demand?A. life-saving medicineB. television setsC. computersD. a particular brand of chewing gum

Multiple Choice9. Which of the following is an example of a

good with inelastic demand?A. life-saving medicineB. television setsC. computersD. a particular brand of chewing gum

Multiple Choice10. Total revenue is defined as

A. the amount of profit a company makes.B. the amount of profit a company makes after paying taxes.C. the amount of money a company makes by selling its goods.D. the amount of money affected by price elasticity.

Multiple Choice10. Total revenue is defined as

A. the amount of profit a company makes.B. the amount of profit a company makes after paying taxes.C. the amount of money a company makes by selling its goods.D. the amount of money affected by price elasticity.

Key TermsYou would refer to a(n) _____ to find the

quantity that a person would purchase at each price that could be offered in a market.

Key TermsYou would refer to a demand curve to find

the quantity that a person would purchase at each price that could be offered in a market.

Key TermsFor a(n) _____, a consumer’s demand will

increase as his or her income increases.

Key TermsFor a normal good, a consumer’s demand

will increase as his or her income increases.

Key TermsThe _____ occurs when an increase in price

decreases a consumer’s real income.

Key TermsThe income effect occurs when an increase

in price decreases a consumer’s real income.

Key TermsDemand for goods that are necessities is

usually _____.

Key TermsDemand for goods that are necessities is

usually inelastic.

Key TermsIf the elasticity of demand of a good is

equal to 1, it is described as _____.

Key TermsIf the elasticity of demand of a good is

equal to 1, it is described as unitary elastic.

Key TermsAccording to the _____, when prices

increase, demand will decrease.

Key TermsAccording to the law of demand, when

prices increase, demand will decrease.

Key TermsTwo goods that are bought and used

together are _____.

Key TermsTwo goods that are bought and used

together are complements.

Key TermsInferior goodsLaw of demandElasticElasticity of demand

Main IdeasDescribe the substitution effect in your own

words, and give one example.

Main IdeasThe substitution effect occurs when a

consumer reacts to a rise in the price of one good by consuming less of that good and more of a cheaper substitute. An example is using the generic brand of a good when the name brand version goes up in price.

Main IdeaList and describe three causes for shifts in

the demand curve.

Main IdeasChange in incomeChange in consumer expecationsChange in populationChange in consumer tastes and advertising

Main IdeasWhat are four factors that affect elasticity?

Main IdeasAvailability of substitutesRelative importanceNecessity v. LuxuryPrice change over time

QuestionsWill there always be a demand for inferior

goods? How could demand for an inferior good decrease?

Agree or disagree: An increase in income will shift the demand curve for a normal good to the left.

Demand ScheduleDemand Schedule

Service

Urban Rural

10

$20

$30

$10

$20

$30

Lawn

15

8 2 82 71 42

Taxi

84

78 37 10 8 1

Hair

92

61 18 88 57 19

How many urban residents would take a taxi that costs $20?

Which service has equally low demand in both regions at $30?

Compare taxi rides. What reason could there be for such different demands in different areas?

Which service has inelastic demand in both areas?