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Name ___________________________ Class _____________________ Date __________
CHAPTER 4: Demand
Test A
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A. Key Terms and Concepts
Directions: Match each term with the descriptions. Write the letter of the correct answer in the
blank provided. Not all of the choices will be used.
1. entire amount of money a company receives
by selling goods or services
2. table listing the quantity of a good that all
consumers will buy at various prices
3. consuming less of a good and more of another
as a reaction to a price increase
4. goods that are used in place of one another
5. concept that consumers will buy more of a good
when its price is lower and less when its price is
higher
6. change in consumption that results when a price
increase causes real income to decline
7. good that consumers demand less of when their
incomes increase
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
inelastic
law of demand
substitution effect
income effect
total revenue
market demand
schedule
elasticity of demand
ceteris paribus
substitutes
inferior good
complements
demographics
8. two goods that are bought and used together
9. not very sensitive to price changes
10. measure of how consumers respond to price changes
B. Main Ideas
Directions: Write the letter of the correct answer in the blank provided.
11. A music store holds a one-day half-price sale on all CDs. Consumers react
to the sale by buying more CDs than on a typical day. This action is an
example of
a. elasticity of demand.
c. the law of demand.
b. the substitution effect.
d. total revenue.
12. If you create a demand schedule for an individual and for a market for the
same product, what will remain the same in both schedules?
a. prices of the good or service
c. percent difference at each price
b. demand curve
d. quantity demanded
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36
Name ___________________________ Class _____________________ Date __________
CHAPTER 4: Demand
Test A (continued)
Use the graph below to answer questions 13 and 14.
Demand Curve
$15
Price (per shirt)
$12
Original
Demand
$9
New
Demand
$6
$3
$0
0
100
200
300
400
500
Quantity
13. The graph shows a shift in the market demand curve for a certain brand of
shirt. The market demand curve predicts
a. the highest or lowest future prices for these shirts.
b. how people will change the number of shirts they buy.
c. the long-term popularity of certain shirt brands.
d. whether the quantity of shirts demanded will remain constant.
14. How many fewer shirts are sold at the new demand level for any given
price?
a. 200
c. 400
b. 300
d. 500
15. Your demand for a good is inelastic if you consider the good to be
a. inferior.
c. normal.
b. essential.
d. replaceable.
16. The substitution effect and the income effect describe
a. how income changes when buyers change jobs.
b. choices that producers make to improve goods.
c. factors that influence consumer buying choices.
d. market changes that affect production of goods.
17. Which of the following is the correct mathematical formula for calculating
elasticity of demand?
a. percent change in price demanded/percent change in quantity
b. percent change in price/percent change in market demand
c. percent change in substitutes/percent change in value demanded
d. percent change in quantity demanded/percent change in price
Copyright © by Pearson Education, Inc., or its affiliates. All rights reserved.
37
Name ___________________________ Class _____________________ Date __________
CHAPTER 4: Demand
Test A (continued)
18. The price of cranberry juice suddenly increases. As a result, Glenda begins
drinking more grape juice, which is less expensive, but tastes just as good to
her. In this case, Glenda’s elastic demand is due to
a. availability of substitutes.
c. necessities versus luxuries.
b. relative importance.
d. change over time.
19. Due to an increase in her rent, Isa needs to cut back her spending on other
items. Which of the following types of goods will Isa consume less of?
a. substitutes
c. inferior goods
b. normal goods
d. complements
20. If a store owner notices that demand for all types of bread has been dropping
steadily over the last year, while the price has changed very little, what
conditions might she be seeing?
a. a change in the quantity demanded due to the income effect
b. a change in demand due to a popular low-carbohydrate diet
c. a shift right due to the introduction of bread-making machines
d. a demand curve shift to the left due to the substitution of inferior goods
C. Critical Thinking and Writing
Directions: Use complete sentences to answer the questions below.
21. Why is it important for businesses to understand the demographics of their
markets?
22. Give an example of a good or service for which elasticity of demand may
change over time rather than immediately, and discuss why this happens.
D. Essential Question Essay
Directions: When considering this question, think about what you have learned about demand
from your textbook, class work, and other sources. You may wish to include information from
current events to support your arguments.
23. Essential Question: How do we decide what to buy?
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