Demand Practice Assignment
Complete each of the following items and use notes & the text (4:1 & 4:2) to check answers.
1. Which of the following is the best example of the substitution effect?
(A) Joe buys fewer apples and more oranges as the result of an increase in the price of apples.
(B) Joe buys more apples when his income increases.
(C) Joe buys an apple slicer when the price of apples decreases.
(D) Joe buys less sugar as the result of an increase in price of apples.
2. If coffee and cream are complements, an increase in the price of coffee will cause
(A) the demand for cream to increase.
(B) the demand for cream to decrease.
(C) the total spending on coffee to increase
(D) no change in the demand for cream; only quantity demanded would be affected.
3. The current demand curve for a normal good would increase if
(A) the price of a complementary good rose.
(B) the price of a substitute good fell.
(C) consumers suddenly believed the price of the good would be sharply lower in the future.
(D) consumer income increased.
4. Which of the following would most likely increase demand for tickets to NHL hockey games?
(A) a decrease in consumer income
(B) an increase in the price of tickets to NBA basketball games
(C) an increase in the price of refreshments sold at the hockey games
(D) None of the above is correct.
5. Which of the following would most likely decrease the current demand for television sets?
(A) an increase in consumer income
(B) a decrease in the price of cable service
(C) a decrease in the expected future price of television sets
(D) an increase in the price of television sets
6. Which of the following is most likely to shift the demand curve for electric heat to the right?
(A) consumers becoming more energy conscious
(B) a decrease in income
(C) a decrease in the price of electricity
(D) an increase in the price of fuel oil used to heat homes
7. When economists say the demand for a product has decreased, they mean that the
(A) demand curve has shifted to the left.
(B) price of the product has increased, and consequently consumers are buying less of it.
(C) cost of producing the product has increased.
(D) amount of the product that consumers are willing to purchase at various prices has increased.
8. "I'm tired of eating muffins for breakfast. Today I'm trying a bagel." This statement most clearly
reflects the
(A) law of increasing opportunity cost.
(B) second law of demand.
(C) law of diminishing marginal utility.
(D) law of comparative advantage.
9. Which of the following factors would cause the demand curve for an inferior good to increase
(shift to the right)?
(A) a decrease in the price of the good
(B) a decrease in income
(C) a decrease in the price of a substitute good
(D) an increase in the price of a complementary good
10. Broncos quarterback, Peyton Manning, breaks records for most touchdown passes to start a
season. Which of the following statements is an accurate reflection for the demand of Manning
jerseys among Broncos fans?
(A) an increase as Manning becomes a more popular player
(B) a decrease because the Broncos can increase the price due to his success
(C) an increase because fans expect the price will fall once the Broncos lose the Super Bowl
(D) none of the above
11. Draw a graph of the demand for shrimp in the space below & to the right.
Price
5
10
15
Quantity
9
6
3
12. It is realized that the shrimp from the Gulf Coast
are contaminated from the oil spill. Show the change
in the demand curve on the graph on the right and
label the new demand curve D2.
Elasticity of Demand Practice Assignment
1. Which of the following would be most elastic if price changes dramatically?
a. prescription medicine
b. electricity
c. organic food
d. milk
2. Considering the concept of elasticity, how does a person’s perception of whether a good
is a necessity or a luxury affect his or her purchases of it?
a. Different people will have different concepts of necessity and luxury.
b. People who have a lot of money will buy goods even if they think they are a luxury.
c. A good that is perceived as expensive will no longer be considered a necessity.
d. A good that is perceived as a necessity will be purchased even if the price rises.
3. What effect does the availability of many good substitutes have on the elasticity of
demand for a good?
a. Demand is elastic.
b. Demand is perfectly elastic.
c. Demand is inelastic.
d. Demand is not affected.
4. What does elasticity of demand measure?
a. an increase in the quantity available
b. a decrease in the quantity demanded
c. how buyers will change their quantity demanded when price rises or falls
d. the amount of time consumers need to change their demand for a good
5. When elasticity of demand for a good is greater than 1, how is demand described?
a. perfectly elastic
b. perfectly inelastic
c. elastic
d. inelastic
6. If the price of a good increases from $4 to $5, and as a result, the quantity demanded
decreases from 50 to 40, what will be the elasticity of demand?
a. 0.20
b. 0.25
c. 0.80
d. 1.25
7. Which of the following is not considered to be a broadly defined good, therefore having
an elastic demand?
a. food
b. clothing
c. cell phone
d. Verizon cell plan
8. Properly draw and label each of the following types of demand curves.
a. perfectly elastic
b. elastic
c. inelastic
d. perfectly inelastic