1. Demand Review
Economics
Mr. Bordelon

2. Multiple Choice
1. 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.

3. Multiple Choice 1. 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.

4. Multiple Choice
2. 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.

5. Multiple Choice 2. 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.

6. Multiple Choice
3. 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.

7. Multiple Choice
3. 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.

8. Multiple Choice
4. 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.

9. Multiple Choice 4. 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.

10. Multiple Choice
5. For most goods, a rise in people’s income means that there will be A. a substitution effect. B. a rise in prices. C. an increase in demand. D. a decrease in demand.

11. Multiple Choice
5. For most goods, a rise in people’s income means that there will be
A. a substitution effect.
B. a rise in prices.
C. an increase in demand.
D. a decrease in demand.

12. Multiple Choice
6. Which of the following is NOT an example of complements? A. skis and ski boots B. row boat and oars C. electric shaver and charging cord D. calculator and cell phone

13. Multiple Choice
6. Which of the following is NOT an example of complements? A. skis and ski boots B. row boat and oars C. electric shaver and charging cord D. calculator and cell phone

14. Multiple Choice
7. 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.

15. Multiple Choice 7. 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.

16. Multiple Choice
8. If you keep buying despite a price increase, your demand is A. elastic. B. strong. C. normal. D. inelastic.

17. Multiple Choice
8. If you keep buying despite a price increase, your demand is
A. elastic.
B. strong.
C. normal.
D. inelastic.

18. Multiple Choice
9. Which of the following is an example of a good with inelastic demand? A. life-saving medicine B. television sets C. computers D. a particular brand of chewing gum

19. Multiple Choice
9. Which of the following is an example of a good with inelastic demand?
A. life-saving medicine
B. television sets
C. computers
D. a particular brand of chewing gum

20. Multiple Choice
10. 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.

21. Multiple Choice 10. 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.

22. Key Terms
You would refer to a(n) _____ to find the quantity that a person would purchase at each price that could be offered in a market.

23. Key Terms
You 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.

24. Key Terms
For a(n) _____, a consumer’s demand will increase as his or her income increases.

25. Key Terms
For a normal good, a consumer’s demand will increase as his or her income increases.

26. Key Terms
The _____ occurs when an increase in price decreases a consumer’s real income.

27. Key Terms
The income effect occurs when an increase in price decreases a consumer’s real income.

28. Key Terms
Demand for goods that are necessities is usually _____.

29. Key Terms
Demand for goods that are necessities is usually inelastic.

30. Key Terms
If the elasticity of demand of a good is equal to 1, it is described as _____.

31. Key Terms
If the elasticity of demand of a good is equal to 1, it is described as unitary elastic.

32. Key Terms
According to the _____, when prices increase, demand will decrease.

33. Key Terms
According to the law of demand, when prices increase, demand will decrease.

34. Key Terms
Two goods that are bought and used together are _____.

35. Key Terms
Two goods that are bought and used together are complements.

36. Key Terms
Inferior goods
Law of demand
Elastic
Elasticity of demand

37. Main Ideas
Describe the substitution effect in your own words, and give one example.

38. Main Ideas
The 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.

39. Main Idea
List and describe three causes for shifts in the demand curve.

40. Main Ideas Change in income Change in consumer expecations
Change in population
Change in consumer tastes and advertising

41. Main Ideas
What are four factors that affect elasticity?

42. Main Ideas Availability of substitutes Relative importance
Necessity v. Luxury
Price change over time

43. Questions
Will 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.

44. Demand Schedule
Demand Schedule
Service
Urban
Rural 10
$20
$30
$10
Lawn 15 8 2 82 71 42
Taxi 84 78 37 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?