Chapter 4: Demand

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Chapter 4: Demand

  
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  • 1. 
    Why does a market demand curve show larger quantities than an individual demand curve?
    • A. 

      A market demand curve shows the quantities demanded by all consumers, and an individual demand curve shows the quantities demanded by one consumer.

    • B. 

      A market demand curve is based on a market demand schedule whereas an individual demand curve is based on the demand schedules of selected customers.

    • C. 

      A market demand curve tracks many products, but an individual demand curve tracks only one product

    • D. 

      A market demand curve gives data for all the stores in a region, but an individual demand curve gives data for only one store.


  • 2. 
    The law of demand states that 
    • A. 

      Producers demand the highest possible price for their product and consumers demand the lowest possible price.

    • B. 

      Producers provide only the goods and services for which there is a real consumer demand.

    • C. 

      Only consumers who are willing and able to pay have an actual demand for a product.

    • D. 

      When prices go down, quantity demanded increases; when prices go up, quantity demanded decreases.


  • 3. 
    A market demand schedule shows
    • A. 

      How many units of a product individual customers buy on a regular basis.

    • B. 

      How much of a good or service all consumers are willing and able to buy at each price.

    • C. 

      The cost of products and the number of units sold.

    • D. 

      It shows how to calculate the best price to charge for a product.


  • 4. 
    Which of the following is an example of demand?
    • A. 

      You are calculating how much a week-long backpacking trip would cost.

    • B. 

      You have saved $150.00 and want to buy new shoes and accessories for the prom.

    • C. 

      You have money for a birthday gift for a friend but can't decide what to buy.

    • D. 

      You need a white shirt for work but only have $5.00 on hand.


  • 5. 
    What is the substitution effect?
    • A. 

      The increased benefit consumers get from using different brands of the same product rather than being loyal to one

    • B. 

      The reduced satisfaction consumers get from using a second or third unit of a product

    • C. 

      A switch to more expensive, higher quality products when income increases

    • D. 

      A change in the amount of a product consumers buy because they buy other similar goods


  • 6. 
    A change in quantity demanded is
    • A. 

      A change in the amount of a product consumers will buy because of a change in price.

    • B. 

      A shift in the demand curve vertically or horizontally.

    • C. 

      A change in market situations that leads to a change in availability.

    • D. 

      A change in how much individuals will buy when the price remains the same.


  • 7. 
    Three factors that can cause a change in demand are
    • A. 

      Market size, consumer tastes, and advertising.

    • B. 

      Consumer expectations, marginal utility, and substitutes.

    • C. 

      Income, consumer tastes, and complements.

    • D. 

      Income, substitutes, and advertising.


  • 8. 
    What happens when the income of consumers rises?
    • A. 

      The market size increases.

    • B. 

      The demand for quality products decreases.

    • C. 

      Consumers tend to buy more discounted and generic products.

    • D. 

      Consumers usually demand more normal goods.


  • 9. 
    Consumers' expectations about the price of a good or service will often
    • A. 

      Influence whether a product becomes popular or not.

    • B. 

      Influences consumers to buy substitute products.

    • C. 

      Determine whether consumers buy products now or later.

    • D. 

      Affect the demand for the product's complements.


  • 10. 
    Demand for a product is inelastic when
    • A. 

      The price rises compared to the price of substitutes.

    • B. 

      The quantity demanded changes little as the price changes.

    • C. 

      The product is price sensitive.

    • D. 

      A change in price leads to a large change in the quantity demanded.


  • 11. 
    The availability of substitutes
    • A. 

      Produces a demand curve with a steeper slope.

    • B. 

      Makes a product unit elastic.

    • C. 

      Makes the demand for a product more elastic.

    • D. 

      Leads more consumers to purchase a product.


  • 12. 
    When the price of a good or service goes up, your demand will probably
    • A. 

      Fall if the cost consumes a large proportion of your income.

    • B. 

      Be inelastic if the cost consumes a large proportion of your income.

    • C. 

      Increase if the product is inexpensive.

    • D. 

      Increase if your income also increases.


  • 13. 
    The demand for necessities
    • A. 

      Varies according to price.

    • B. 

      Remains the same no matter what the price.

    • C. 

      Tends to be inelastic.

    • D. 

      Is not affected by available substitutes.


  • 14. 
    Economists measure elasticity of demand by
    • A. 

      Compiling a seller's market demand schedule.

    • B. 

      Plotting shifts in demand.

    • C. 

      Calculating diminishing marginal utility.

    • D. 

      Calculating a seller's total revenue.


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