Name
Date
Class
A
4,
D
EMAND
SCORE
USING KEY TERMS
Matching: Match each item in Column A with the items in Column B. Write the correct
letters in the blanks.
A
B
1. demand
2. marginal utility
a.
measure of responsiveness that shows how a dependent
variable responds to a change in an independent variable
b.
field of economics that deals with behavior and decision
making by small units
c.
describes change in demand when a change in price causes
a relatively larger change in quantity demanded
d.
e.
f.
g.
h.
extra usefulness gained from using one more unit of a product
i.
listing that shows quantities demanded of a product at all
prices
j.
given change in price that causes a proportional change in
quantity demanded
3. demand schedule
4. elasticity
5. substitutes
6. elastic
7. microeconomics
8. unit elastic
9. change in quantity demanded
10. substitution effect
movement along the demand curve
desire, ability, and willingness to buy a product
products used in place of other products
change in quantity demanded due to a change in relative
price
Copyright © by The McGraw-Hill Companies, Inc.
RECALLING FACTS AND IDEAS
Multiple Choice: In the blank at the left, write the letter of the choice that best completes
the statement or answers the question.
11. For most products and services, increased price results in
a. demand for fewer products.
b. demand for more products.
c. reduced demand for substitutes.
d. increased demand for complements.
12. An increase in the price of milk causes a decrease in the demand for cereal. The two products are
a. substitutes.
b. complements.
c. unrelated.
d. demand elastic.
13. Advertising, fashion trends, and new product introductions serve to
a. create consumer needs.
b. increase income effectiveness.
c. create consumer demand.
d. minimize the income effect.
14. Because a modest price increase has little or no effect, the demand for the product is
a. complementary.
b. inelastic.
c. elastic.
d. unit elastic.
Chapter and Unit Tests
29
Name
Date
Class
4,
A
15. A business doubled the price of a product in order to increase profits. Which of the following scenarios
might have occurred?
a.
b.
c.
d.
A
A
A
A
sharp increase in revenues demonstrated the elasticity of the product.
small increase in revenues demonstrated the unit elasticity of the product.
dramatic decline in revenues demonstrated the elasticity of the product.
dramatic decline in revenues demonstrated the inelasticity of the product.
CRITICAL THINKING QUESTIONS
Directions: Answer each of the following sets of questions on a separate sheet of paper.
16. Understanding Cause and Effect Explain how an understanding of elasticity can help business owners determine the most profitable prices to set for their products.
17. Synthesizing Information Explain the income effect and how it is related to the Law of Demand.
APPLYING SKILLS
Using Graphs: Study the graph and answer the questions below.
Demand Curve for Widgets
$5.00
D
Price per Widget
$4.00
$3.00
$2.00
Copyright © by The McGraw-Hill Companies, Inc.
$1.00
D
1
2
3
4
5
6
7
8
9
10
Widgets in Thousands
18. How many widgets were in demand when the price was $4.50?
19. If the demand for widgets at $4.50 was met, what would be the resulting total revenue?
20. Does this graph demonstrate the Law of Demand? Explain.
30
Chapter and Unit Tests
Name
Date
Class
4,
A
GRAPHICS AND DOCUMENT-BASED QUESTIONS
Directions: In the blank to the left, write the letter of the choice that best completes the
statement or answers the question.
Demand Curve for Movie Videos
$ 20
$ 18
Price
$ 16
$ 14
$ 12
$ 10
0
200
400
800
600
Quantity Demanded
1000
1200
_____ 21. According to this demand curve, how many movie videos will be demanded at a price of $10?
b. 600
d. 1000
Price per Unit of Product X
Copyright © by The McGraw-Hill Companies, Inc.
a. 400
c. 800
$500
$400
$300
$200
$100
D1
1,000
2,000
3,000
D2
4,000
5,000
Quantity of Product X Demanded
Chapter and Unit Tests
31
Name
Date
Class
4,
A
_____ 22. Which of the following events could cause the movement shown in the graph?
a. a decrease in income
c. a decrease in the price of a substitute
b. an increase in population
d. an increase in the price of a complement
Myles Monaghan could almost be the next Alex Rodriguez. He’s got a cannon for an arm. He almost
never drops the ball. . . . So how come he spent his last few springs playing lacrosse? “BASEBALL IS
BORING,” says the 12-year-old Larchmont, N.Y., jock. Nationwide, the average number of children
playing America’s once-favorite pastime has tumbled nearly 20% according to the Sporting Goods
Manufacturers Association. Sales of everything from balls to baseball cards are falling.
Source: MSNBC News (online), June 15, 2001.
_____ 23. Based on the passage and what you know about demand, why are sales of baseball cards dropping?
a. Baseball cards are a substitute for the
b. The price of baseball cards is rising.
sport of baseball.
c. Baseball cards are a complement of the
d. The price of baseball cards is falling.
sport of baseball.
Directions: Answer each of the following questions on a separate sheet of paper.
America’s biggest export is . . . its pop culture—movies, TV programs, music, books and computer software. . . . The McDonald’s restaurants that are opening at a rate of six a day around the world, the baggy
jeans and baseball caps that have become a global teenage uniform, the Barbie dolls and Hot Wheels
increasingly demanded by children, are all seen as part of the same U.S. invasion.
Source: The Washington Post, November 30, 1998.
_____ 24. Think about the passage. When Barbie dolls first started to become wildly popular overseas, how did this
new-found popularity likely affect the demand curve for Barbie dolls?
Quantity Demanded
Old Demand
Curve
New Demand
Curve
$80
0
1
$70
2
5
$60
4
8
$50
7
10
$40
12
15
$30
15
22
_____ 25. In the table, does the movement in the demand curve from the old to the new represent a change in
demand or a change in quantity demanded? Explain.
32
Chapter and Unit Tests
Copyright © by The McGraw-Hill Companies, Inc.
Price
Name
Date
Class
B
4,
D EMAND
SCORE
USING KEY TERMS
Matching: Match each item in Column A with the items in Column B. Write the correct
letters in the blanks.
A
B
1. demand curve
2. change in demand
3. Law of Demand
4. complements
a.
illustrates the demand of everyone interested in purchasing a
product
b.
c.
d.
e.
quantity demanded of a product varies inversely with its price
f.
change in quantity demanded because a price change altered
consumers’ real income
g.
products where the use of one product increases the use of
another
h.
i.
j.
willingness to buy more or less of a product at the same price
5. market demand curve
6. demand elasticity
7. microeconomics
8. inelastic
9. diminishing marginal utility
10. income effect
study of the economic behavior of individuals and firms
extent to which a change in price causes a change in demand
decline in extra satisfaction from using additional quantities of
a product
graph showing the quantity demanded at every price
describes a given change in price that causes a relatively
smaller change in quantity demanded
RECALLING FACTS AND IDEAS
Copyright © by The McGraw-Hill Companies, Inc.
Multiple Choice: In the blank at the left, write the letter of the choice that best completes
the statement or answers the question.
11. A demand schedule shows
a. an upward-sloping curve that illustrates the positive relationship between price and quantity demanded.
b. a listing of the various quantities demanded of a particular product at all prices that might prevail in
the market.
c. the fluctuations in demand that occurred over a specified period of time.
d. the fluctuations in demand scheduled to occur over the following year.
12. Consumers’ willingness to replace a costly item with a less costly item is an example of
a. the substitution effect.
b. the income effect.
c. demand elasticity.
d. complements.
13. An increase in the price of cameras results in a decrease in the demand for film. The two products are
a. substitutes.
b. demand elastic.
c. unrelated.
d. complements.
14. When a customer’s need for a product is not urgent, demand tends to be
a. inelastic.
b. elastic.
c. complementary.
Chapter and Unit Tests
d. unit elastic.
33
Name
Date
Class
4,
B
15. When a manufacturer of pain medication reduced the price of the medication by 30%, profits declined by
almost exactly 30%. Demand for the product is
a. inelastic.
b. elastic.
c. unit elastic.
d. complementary.
CRITICAL THINKING QUESTIONS
Directions: Answer each of the following sets of questions on a separate sheet of paper.
16. Synthesizing Information Explain how changes in consumer tastes and consumer incomes affect demand.
17. Analyzing Information Choose a consumer item you use or with which you are familiar. List its complements
and substitutes, providing an explanation for each item that you list. At current prices, what do you think the
elasticity of demand is for the item? Explain your answer.
APPLYING SKILLS
Using Graphs: Study the graph and answer the questions below.
Demand Curve for Widgets
$5.00
D
Price per Widget
$4.00
$3.00
$2.00
$1.00
1
2
3
4
5
6
7
8
9
10
Widgets in Thousands
18. How many widgets were in demand when the price was $1.50?
19. If the demand for widgets at $1.50 were met, what would be the resulting total revenue?
20. What would be the quantity demanded if the price were then lowered from $1.50 to $1? Is demand elastic, unit
elastic, or inelastic between these two prices? Explain.
34
Chapter and Unit Tests
Copyright © by The McGraw-Hill Companies, Inc.
D
Name
Date
Class
4,
B
GRAPHICS AND DOCUMENT-BASED QUESTIONS
Directions: In the blank to the left, write the letter of the choice that best completes the
statement or answers the question.
Demand Curve for Movie Videos
$ 20
$ 18
Price
$ 16
$ 14
$ 12
$ 10
0
200
400
800
600
Quantity Demanded
1000
1200
_____ 21. According to this demand curve, if the price of movie videos increases from $14 to $16, the quantity
demanded will
Price per Unit of Product X
Copyright © by The McGraw-Hill Companies, Inc.
a. fall from 600 to 400.
c. fall from 400 to 200.
b. rise from 400 to 600.
d. rise from 200 to 400.
$500
$400
$300
$200
$100
D1
1,000
2,000
3,000
D2
4,000
5,000
Quantity of Product X Demanded
Chapter and Unit Tests
35
Name
Date
Class
4,
B
_____ 22. The movement shown in this graph represents a change in what?
a. quantity demanded
c. demand
b. marginal utility
d. demand elasticity
Rice is what you’ll probably end up with these days if your local McDonald’s is in Indonesia. With the
collapse of the Indonesian currency, the rupiah, in 1998, potatoes . . . have quintupled in price. That
means rice is turning up with increasing frequency as an alternative to the french fry. . . . It’s not hard to
fathom why fries are an endangered menu item, says Jack Greenberg, CEO of McDonald’s: “No one can
afford them.”
Source: Reprinted from December 14, 1998 issue of Business Week, by special permission, copyright © 1998 by
The McGraw-Hill Companies, Inc.
_____ 23. Based on this passage, McDonald’s is serving rice in its Indonesian restaurants because of
a. a decrease in the price of a complement.
c. a decrease in price of a substitute.
b. an increase in the price of a complement.
d. an increase in the price of a substitute.
Directions: Answer each of the following questions on a separate sheet of paper.
The number of housing starts shows the demand for new homes. Economists forecast housing starts by
using the current month’s permits as a predictor. Building permits tend to move in tandem with starts on
a month-to-month basis. They are also considered to be a leading indicator of the economy in general.
Increases in building permits and starts are common during periods following a drop in mortgage rates.
Source: Standard & Poor’s.
24. According to the passage, when economists want to examine the demand for new homes, what do they use as a
predictor?
Market Demand for Concert Tickets
$70
D
60
Copyright © by The McGraw-Hill Companies, Inc.
Price
50
a
40
b
30
20
0
D
1
3
6
10
Quantity (thousands)
15
25. Summarize what Point a on the graph represents.
36
Chapter and Unit Tests