Chapter 4 - Demand - Test

What does the law of demand state?

• As price increases, quantity demanded also increases.
• As price increases, quantity demanded decreases.
• Demand remains constant regardless of price changes.
• Quantity demanded is not affected by price.

What is the demand curve?

• A curve that shows the relationship between price and supply.
• A curve that shows the relationship between price and quantity demanded.
• A curve that measures only consumer income.
• A curve that tracks price changes over time.

Which of the following would likely cause an increase in demand?

• A rise in the price of a substitute good.
• A decrease in consumer income.
• A fall in the price of a complementary good.
• A decrease in consumer population.

What is an inferior good?

• A good that consumers buy less of as their income increases.
• A low-quality good.
• A good that consumers buy more of as their income increases.
• A good with no substitutes.

How does the substitution effect influence demand?

• Consumers buy less of a product when its price falls.
• Consumers buy more of a product as its price rises.
• Consumers buy more of a substitute product when the original product’s price rises.
• It has no effect on demand.

What happens to demand for a normal good if consumer income increases?

• Demand decreases.
• Demand remains the same.
• Demand increases.
• It depends on the price of substitutes.

Which of the following is an example of a complementary good?

• Butter and margarine.
• Coffee and tea.
• Smartphones and apps.
• Pens and pencils.

What is meant by "demand elasticity"?

• The ability of demand to stay constant regardless of price.
• The sensitivity of quantity demanded to a change in price.
• The change in price due to changes in consumer income.
• The shift of the demand curve.

Which of the following would indicate that a good has inelastic demand?

• Quantity demanded changes significantly with a price change.
• Quantity demanded does not change much with a price change.
• Quantity demanded decreases when income rises.
• Quantity demanded fluctuates rapidly with price changes.

If a price increase leads to a large decrease in quantity demanded, the product is said to have:

• Elastic demand.
• Inelastic demand.
• Unitary demand.
• Complementary demand.