Study Guide – Demand and Supply – Chapter 4
1. the desire to own something and
the ability to pay for it
a. substitutes
2. a measure of how consumers react
when prices change
c. demand curve
b. income effect
3. two goods that are bought and used together
d. inferior good
4. when a change in price does not affect
demand very much
e. total revenue
5. a list of the quantity of a good that
a person will buy at different prices
f. elasticity of
demand
g. inelastic
6. a graph of a demand schedule
h. complements
7. all the money a company earns by
selling goods or services
i. demand
j. demand schedule
8. goods that are used in place of one another
9. people feel poorer when prices for goods
increase
10. a good that consumers demand less of
when their incomes increase
11. A music store holds a half-price sale on all CDs. During the sale,
people buy more CDs than usual. What does this event show?
a. inelasticity of demand
c. the law of demand
b. the substitution effect
d. a demand schedule
12. What stays the same when you change an individual demand
schedule into a market demand schedule for the same product?
a. price of the product
c. number of consumers
b. demand curve
d. quantity demanded
13. John gets a raise and decides to buy fancy pasta instead of cheaper
instant noodles. Which phrase describes what instant noodles are for
John?
a. unitary elastic
c. market demand
b. complements
d. inferior goods
14. The price of cranberry juice suddenly increases. As a result, Glenda
begins drinking more grape juice. Grape juice is less expensive, but
she likes it just as much. Why is Glenda’s demand for juice elastic?
a. availability of substitutes
c. necessities versus luxuries
b. relative importance in her budget
d. change over time
15. Jean needs a certain medicine. Even though the price for the
medicine suddenly goes up very much, Jean continues to buy it.
Why is Jean’s demand for this medicine inelastic?
a. Its elasticity is exactly equal to 1. c. The product is a luxury.
b. It requires a small percentage
d. There are few or no
of Jean’s income.
substitutes available.
16. What do businesses owners learn by multiplying the price they
charge for a good by the quantity sold?
a. profit shares for employees
c. total revenue for the good
b. elasticity of demand for the good
d. market demand for the good
17. A restaurant owner has not changed menu prices in a year. One
month ago, the owner noticed that sales had fallen by 50 percent.
Which of the following most likely caused the demand curve to shift?
a. Area population increased.
c. Gas prices decreased.
b. A nearby factory shut down.
d. A local newspaper praised
the restaurant’s food.
18.
a.
b.
c.
d.
Why does an economist create a market demand schedule?
to learn what demands the market will make
to see how a market would change if conditions in an area changed
to predict how all people will change their buying habits
to show how various conditions can change an individual’s demand
19. What does it mean when you have demand for a good or service?
a. You can afford it but may
c. You are able to buy it but
be unwilling to buy it.
not at the given price.
b. You want it but may not
d. You are willing and able to
have the money for it.
buy it at the given price.
20. If prices rise but not income, what is the effect on demand?
a. Quantity demanded increases.
c. More goods are bought.
b. Fewer goods are bought.
d. Demand stays the same.
21.
What happens when the price of Item A increases?
a. Consumers buy Item A even
c. Consumers buy the cheaper
if they do not want it.
Item B as a substitute.
b. Substitutes increase in price.
d. Item A gets more popular.
Study Guide – Demand and Supply – Chapter 5
1. how much the quantity supplied changes
when price goes up or down
2. when the marginal product decreases as
the number of workers increases
3. fixed costs and variable costs
4. amount of goods for sale
5. government payment that helps a business
6. chart that tells how much a supplier will
offer at different prices
7. law that tells how a good must be made
8. when producers make more as price
increases and less as price falls
a. diminishing
marginal returns
b. fixed cost
c. supply curve
d. regulation
e. law of supply
f. subsidy
g. supply
h. total cost
i. elasticity of supply
j. supply schedule
9. cost that does not change
10. graph of quantity supplied at different prices
11. Which is a fixed cost?
a. rent
b. labor
c. raw materials
d. heating fuel
12. Gerda owns a grocery store. Increasing prices make her willing to
supply more. What is the first thing Gerda does?
a. increase her tax payments
c. have people work more
hours
b. limit the variety of food she sells
d. move to a bigger store
13. Summer causes demand for ice cream to go up. What happens next?
a. Ice cream factory workers strike.
c. Ice cream makers raise
prices.
b. Factories make less ice cream.
d. Stores import ice cream.
14. A guitar maker builds 10 guitars per month. His total costs are
$3,000 per month. What is the average cost of each guitar?
a. $150
b. $250
c. $300
d. $30
15. Suppose the supply of walnuts is inelastic. What will growers do in
the short run if the price increases?
a. They will not increase production.
b. They will increase production.
c. They will decrease production.
d. They will grow something else.
16. A steel mill has fixed costs of $100 per hour and variable costs of
$50 per hour. What will happen to these costs if the mill closes?
a. Both fixed and variable costs will remain the same.
b. The mill will have no fixed costs or variable costs.
c. The fixed costs will decrease, but the variable costs will increase.
d. The variable costs will drop, but the fixed costs will stay the same.
17. A factory makes pencils. New machines in the factory make it faster
and cheaper to make pencils. What will happen next?
a. Costs will drop, but supply will remain the same.
b. Supply and costs will both decrease.
c. Costs will go down and supply will go up.
d. At first, supply will rise, but then it will decrease.
18. How does an increase in an excise tax on cars affect the supply of cars?
a. More cars will be made.
b. Fewer cars will be made.
c. Supply will stay the same.
d. Supply will increase.
19. Which of these products or services is likely to have an
inelastic supply in the short run?
a. cargo ships
c. newspapers
b. haircuts
d. staples
20. When the price of a product goes down, what happens to producers?
a. Existing producers expand.
b. Some produce less, and others leave the market.
c. Existing firms continue their usual output.
d. New firms enter the market.
21. What does a supply schedule show?
a. quantity supplied at one price
c. changes in costs of labor and parts
b. factors that could influence
d. supply for a good at many prices
supply
22. A graph of the information in a supply schedule creates which of the
following?
a. a demand curve
c. the quantity of goods demanded
b. a supply curve
d. the supply of goods available