Chapter 7: Demand

Question 1

What is demand?

Answer 1

The willingness and ability to buy a product

Question 2

Fill in the blank:

A rise in price will lead to a _____ in demand.

A fall in price will lead to a ____ in demand.

Answer 2

fall, rise

Question 3

True or false?

As price rises, the willingness and ability to buy a product falls

Answer 3

True

Question 4

What is market demand?

Answer 4

It is the total demand for a product

Question 5

What is individual demand?

Answer 5

It is the amount of a product an individual is willing and able to buy at different prices.

Question 6

What is aggregation?

Answer 6

It is the addition of individual components to arrive at a total amount

Question 7

What does a demand schedule list?

Answer 7

It lists the different quantities demanded of a product at different prices

Question 8

In a demand curve, what is measured on the vertical axis?

Answer 8

The price of the product

Question 9

In a demand curve, what is measured on the horizontal axis?

Answer 9

The quantity demanded of the product

Question 10

Is the demand curve downwards or upwards?

Answer 10

Downwards

(TIP: You can remember this by knowing that demand starts with a “D”, like dirt or downwards)

Question 11

To save time, economists will draw the demand curve as a straight line to make it more clear. Is it still referred to as a curve?

Answer 11

Yes

Question 12

A movement along the demand curve is due to what?

Answer 12

A change in price

Question 13

What is an extension in demand?

Answer 13

It is a rise in the quantity demanded due to a fall in price of the product itself.

Question 14

How would an extension in demand look on a graph(would the point move up or down?)

Answer 14

It would move down

Question 15

How would a contraction in demand look on a graph(would the point move up or down?)

Answer 15

It would move up

Question 16

List as many conditions of demand you can

Answer 16

Season, change in income, change in the price of a complement, change in the price of substitute, change in population, advertising, and change in taste and fashion.

Question 17

When it is summer, does the demand for ice cream increase or decrease? Will the curve shift left or right?

Answer 17

The demand will increase and the curve will shift right

Question 18

When it is winter, does the demand for ice cream increase or decrease? Will the curve shift left or right?

Answer 18

The demand will decrease and the curve will shift left

Question 19

What are normal goods?

Answer 19

They are goods whose demand increases as income increases

Question 20

What are inferior goods?

Answer 20

They are goods whose demand decreases as income increases

Question 21

What are example of normal and inferior goods(make sure they are related)

Answer 21

Normal good: Sportscar
Inferior good: Old, cheap, and used car

Question 22

True or false?
As income increases for consumers, they will purchase normal goods instead of inferior goods

Answer 22

True

Question 23

When the income of consumers increases… (Where will the demand curve shift?)

Answer 23

The demand curve will shift right

Question 24

When the income of consumers decreases… (Where will the demand curve shift?)

Answer 24

The demand curve will shift left

Question 25

What is a substitute?

Answer 25

It is a product that can be used to replace another product

Question 26

Pepsi and Coca-Cola are substitutes. Let’s say they are each $4 for one can. If the price will increase for Pepsi from $4 to $6…

Answer each question:
a) What will happen to the demand for Coca-Cola, and where will the demand curve shift?

b) Is Pepsi increasing its price an extension or contraction in demand?

c) Does the demand curve for Pepsi shift? If so, where will it shift?

Answer 26

a) The demand for Coca-Cola will increase and the curve will shift right

b)Contraction in demand

c) No, a change in price is a movement along the curve

Question 27

What is a complement?

Answer 27

It is a product that relies on another product(it used together with another product)

Question 28

What is an example of two products that rely on each other?

Answer 28

Cereal and milk
Milk and coffee
Printers and ink
Whiteboards and markers
Game consoles and video game CDs
Smartphones and covers
Hot dogs and hot dog buns
Bread and butter
Laptops and laptop cases
Peanut butter and jelly
Cars and gas
Toothbrush and toothpaste
Fries and ketchup

Question 29

Cereal and milk rely on each other. If the price of cereal increases, what happens to both of the products?

Answer 29

For cereal, there will be a contraction in demand, but there will be no shifting.
For milk, the curve will shift left because there is less demand for cereal and, therefore less demand for milk. There was no change in the price of milk, but the demand decreased, so it shifted left.

Question 30

If firms spend more money on advertising, will the curve shift left or right?

Answer 30

Right

Question 31

If the population decreases, will the curve shift left or right?

Answer 31

left

Question 32

If a product becomes more trendy and popular, will the curve shift left or right?

Answer 32

right