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Economics
Chapter Four
Demand
Directions; use the information in your textbook to answer the following questions.
Section One:
1. In a market system, the interaction of buyers and sellers determines the prices of
most goods as well as what quantity of a good will be produced.
2. Demand is the desire to own something and the ability to pay for it.
3. The Law of Demand –
When a good’s price is lower, consumers will buy more of it. When the price
is higher, consumers will buy less of it.
4. The law of demand is the result of two separate behavior patterns; the
substitution effect and the income effect.
5. The substitution effect takes place when a consumer reacts to a rise in the price
of one good by consuming less of that good and more of another good.
6. The income effect takes place when rising prices make consumer feel poorer.
7. True or false;
Economists measure consumption by the amount of money spend to buy goods
and services.
8. True or false;
To have demand for a good, you must be willing and able to buy it at the
specified price.
9. A demand schedule is a table that lists the quantity of a good that a person will
purchase at each price in the market.
10. A market demand schedule is a table that shows the quantities demanded at
each price by all consumers in the market.
11. A demand curve is a graphic representation of a demand curve.
12. True or false;
The market demand curve is only accurate for one very specific set of market
conditions.
13. Graph the following demand schedule below.
Price Per Slice
$3.00
$2.50
$2.00
$1.50
$1.00
$ .50
Number of Slices
0
1
2
3
4
5
Section Two:
14. When economists take into account only changes in price to the quantity demand
they are following the assumption of ceteris paribus (all other things held
constant.)
15. True or false;
A demand curve is accurate only as long as there are no changes other than price
that could affect the consumer’s decision.
16. Any movement along the demand curve is referred to as a change in quantity
demanded.
17. True or false;
When we drop the ceteris paribus rule and allow other factors to change, we no
longer move along the demand curve. Instead the entire demand curve shifts.
18. A shift of the entire demand curve is what economists refer to as a change in
demand.
19. True or false;
The price of a good will cause the demand curve to shift either to the left or to the
right.
20. List the five non-price factors that can cause demand for a good to change.
A. Income
B. Consumer expectations
C. Population
D. Consumer taste
E. Prices of related goods
21. A normal good is a good that consumers demand more of when their income
increases.
22. An inferior good is a good that consumers demand less of when their income
increases.
23. If two goods are bought and used together, then those goods are complementary
goods.
24. If two are used in place of one another, then those goods are substitute goods.
25. Coke-cola and Pepsi are examples of substitute goods.