Foundations of Microeconomics, 5e (Bade/Parkin)
Chapter 4 Demand and Supply
4.1 Demand
1) A market is defined as
A) a physical place where people buy only goods.
B) a physical place where people buy both goods and services.
C) a store where people buy physical goods.
D) any arrangement that brings buyers and sellers together.
E) a place where one good is bartered for another.
2) EBay
A) will be considered a market when the Internet firms are profitable.
B) is a market because buyers and sellers are brought together to buy and sell.
C) would be a market if there was only one physical location.
D) cannot function as a market.
E) is not a market because buyers can buy from only one seller at any point in time.
3) Which of the following statements is true about a competitive market? A competitive market
A) must have a physical location.
B) includes markets for goods and services but not for inputs.
C) has so many buyers and sellers that no one can influence the price.
D) has one seller competing to sell his or her product.
E) has a handful of sellers but always has many buyers.
4) The “law of demand” refers to the fact that, other things remaining the same, when the price of
a good rises,
A) the demand curve shifts rightward.
B) the demand curve shifts leftward.
C) there is a movement down along the demand curve to a larger quantity demanded.
D) there is a movement up along the demand curve to a smaller quantity demanded.
E) the demand curve shifts rightward and there is a movement up along the demand curve to a
smaller quantity demanded.
5) The law of demand refers to how
A) demand changes when people’s incomes change.
B) demand changes when the prices of substitutes and complements change.
C) the quantity demanded changes when the price of the good changes.
D) the price of the good changes when people’s demand for the good changes.
E) the quantity demanded changes when the demand for the good changes.
6) Which of the following describes the law of demand? When other things remain the same, as
A) the price of gas falls, the quantity demanded of gas increases.
B) the quantity demanded of bread increases, the price of bread falls.
C) the price of peanut butter increases, the quantity demanded of jelly decreases.
D) your income increases, you’ll buy more hamburgers.
E) more people decide to eat pizza, the demand for pizza increases.
7) Gasoline prices increase by 50 percent and other things remain the same. As a result, there is
A) an increase in the demand for gasoline.
B) a decrease in the demand for gasoline.
C) no change in the quantity of gasoline demanded.
D) a decrease in the quantity of gasoline demanded.
E) More information is needed to determine if the demand for gasoline increases or decreases.
8) In stores, it is common to find seasonal products marked down when the season ends. What
explains this behavior?
A) The law of demand is being used to increase the quantity demanded.
B) The store is trying to increase its customers’ demand for the product.
C) The store manager must be trying to drive away customers by selling low quality products.
D) The store is trying to increase its consumer’s incomes by increasing their purchasing power.
E) The store is trying to sell the goods and realizes that they are substitutes for other goods
whose prices have risen.
9) The law of demand implies that, other things remaining the same,
A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded increases.
B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded decreases.
C) as income increases, the quantity of cheeseburgers demanded increases.
D) as the demand for cheeseburgers increases, the price of a cheeseburger falls.
E) as more people demand cheeseburgers, the quantity demanded increases.
10) The quantity demanded of a good or service is
A) the list of all quantities at different prices, as illustrated by a demand schedule and demand
curve.
B) the list of all quantities at different prices, as illustrated by a supply schedule and a supply
curve because the supply shows how much people will be able to buy.
C) the one quantity that is demanded at several different prices.
D) one quantity at one price.
E) the same as the demand for the good or service.
11) What is the “quantity demanded”?
A) the amount of a good people desire
B) the amount of a good people are able and willing to buy during a specific time period and at a
given price
C) the amount of a good people are able and willing to buy at all possible prices
D) the maximum amount of a good that can be consumed during a specific time period
E) the minimum amount of a good that people are willing to buy during a specific time period
and at a given price
12) The “quantity demanded” of any good or service is ________ during a specified time period
and at a specified price.
A) the amount people are willing to buy
B) the amount people are able to buy
C) the amount people are willing and able to offer
D) the amount people are willing and able to buy
E) the amount people are willing to buy because it is the amount sellers are willing to sell
13) An increase in the quantity demanded is shown as a
A) movement along the demand curve.
B) movement toward the demand curve.
C) rightward shift of the demand curve.
D) leftward shift of the demand curve.
E) both a movement along the demand curve and a shift of the demand curve.
14) Which of the following is true regarding demand?
i. Demand is the relationship between quantity demanded and the price of a good when all
other influences on buying plans remain the same.
ii. Demand refers to one quantity at one time.
iii. “Demand” and ” quantity demanded” are the same thing.
A) i only.
B) ii only.
C) both i and ii
D) iii only.
E) both ii and iii.
15) The price of cotton clothing falls. As a result,
A) the quantity demanded of cotton clothing increases.
B) the demand for cotton clothing increases.
C) the quantity demanded of cotton clothing decreases.
D) the demand for cotton clothing decreases.
E) both the demand for cotton clothing increases and the quantity demand of cotton clothing
increases.
16) The American Dairy Association starts a highly successful advertising campaign that makes
most people want to drink more milk. As a result,
A) the demand for milk increases.
B) the quantity demanded of milk increases.
C) the price of milk falls to encourage people to drink more milk.
D) the demand for milk is not affected.
E) the demand for milk decreases because the price of milk rises.
17) A demand schedule shows
A) the quantities that people plan to buy in all possible circumstances.
B) the quantities that people plan to buy at each different price when all other influences on
buying plans remain the same.
C) the quantities that people would plan to buy if they could afford them at each different price
when all other influences on buying plans remain the same.
D) the quantities that people plan to buy at each different income when all other influences on
buying plans remain the same.
E) the quantities that people plan to buy at each different price as long as producers are willing to
supply that quantity.
18) A demand schedule
A) shows the quantity demanded at one price.
B) is a graph showing a relationship between the quantity demanded and the price of a good.
C) is a list of the quantities demanded at each different price when all other influences on buying
plans remain the same.
D) shows that demand is on schedule.
E) shows how the demand changes when the supply changes.
19) The downward slope of a demand curve
A) represents the law of demand.
B) shows that as the price of a good rises, consumers increase the quantity they demand.
C) indicates how the quantity demanded changes when incomes rise and the good is a normal
good.
D) indicates how demand changes when incomes rise and the good is a normal good.
E) indicates how demand changes when the price changes and the good is a normal good.
20) A demand curve
A) has an upward slope.
B) has a downward slope.
C) is a graph of the relationship between quantity demanded of a good and its price.
D) Both answers B and C are correct.
E) Both answers A and C are correct.
21) Demand curves slope ________ because as the price increases and other things remain the
same, the quantity demanded ________.
A) downward; decreases
B) downward; increases
C) upward; decreases
D) upward; increases
E) downward; does not change
22) The market demand curve
A) cannot show how quantity demanded changes in response to a change in price.
B) cannot show a change in demand for a good.
C) is the horizontal sum of individual demand curves.
D) is the vertical sum of individual demand curves.
E) is upward sloping.
23) The market demand curve for mangos is
A) the same as the demand curve of one buyer in a market with many buyers.
B) upward sloping because rich people can afford more mangos than poor people can buy.
C) the horizontal sum of the individual demand curves of all the buyers.
D) the vertical sum of the individual demand curves of all the buyers.
E) the horizontal average of the individual demand curves of all the buyers.
24) There are five hundred buyers in the market for cheese. If we know each individual’s demand
curves, to find the market demand, we must
A) add the prices that each buyer will pay at every quantity.
B) add the quantities that each buyer will purchase at every price.
C) multiply the price times quantity for each buyer and then add the resulting products together.
D) average the price each buyer is willing to pay for each given quantity.
E) give up because there is no way to find the market demand.
25) Market demand curves are obtained by
A) determining the price each consumer is willing to pay for the good and summing those prices
across all consumers.
B) observing the prices and quantities sold in a market over time and plotting those price-
quantity combinations in a graph.
C) summing the quantities every consumer is willing to buy at each different price.
D) observing the behavior of an individual consumer in a market.
E) averaging the quantities every consumer is willing to buy at each different price.
26) The market demand curve for mousetraps is
A) found by summing the quantities of mousetraps demanded at each income level by each
buyer.
B) found by summing the prices of mousetraps at each quantity of mousetraps demanded by each
buyer.
C) the horizontal sum of the individual demand curves for mousetraps of all the buyers.
D) Both answers B and C are correct.
E) Both answers A and C are correct.
27) To find the market demand curve for in-line skates, we must
A) add the quantities demanded at every price and every income by every buyer of in-line skates.
B) add the quantities demanded at prices that all buyers can afford to pay.
C) sum horizontally the individual demand curves of all the buyers.
D) take account of the skate buying plans of all actual and potential buyers in all possible
situations.
E) None of the above answers is correct because we need also to take account of the supply of
in-line skates.
28) The phrase “a change in demand” most directly implies a
A) movement along a demand curve.
B) movement along the price curve.
C) change in the quantity demanded of a good.
D) shift of the demand curve.
E) movement along the quantity curve.
29) When demand increases,
A) consumers are willing to buy more at any price.
B) consumers buy more of the good only if its price falls.
C) the price is lower at any level of quantity demanded.
D) consumers buy more of the good only if its price rises.
E) the demand curve shifts leftward.
30) A change in the demand for apples could result from any of the following EXCEPT
A) a change in the number of buyers.
B) increased preferences for fresh fruit consumption for health reasons.
C) a change in the price of an apple.
D) a change in the price of a banana.
E) a change in income.
31) Changes in which of the following factors do NOT shift the demand curve?
A) the price of the good
B) buyers’ incomes
C) the price of a substitute good
D) the number of buyers
E) the price expected in the future
32) If the demand for used cars decreases after the price of a new car falls, used cars and new
cars are
A) inferior goods.
B) substitute goods.
C) complementary goods.
D) normal goods.
E) The questions errs because it is the quantity of used cars, NOT the demand for used cars, that
will change when the price of a new car falls.
33) Consumers regard Dell computers and Apple computers as substitutes. If the price of a Dell
computer decreases, the
A) demand for Dell computers increases.
B) demand for Apple computers increases.
C) demand for Apple computers decreases.
D) supply of Dell computers increases.
E) demand for Dell computers decreases.
34) Which of the following increases the demand for a good or service?
A) a fall in the price of the good or service
B) a smaller number of consumers wanting to buy the good or service
C) a rise in the price of the good or service
D) a rise in the price of a substitute good or service
E) a rise in the price of a complement
35) Consider the market for cellular phones. Which of the following shifts the demand curve
rightward?
A) an increase in the price of cellular phones
B) a decrease in the price of cellular phones
C) an increase in the price of regular phone service, a substitute for cellular phones
D) a decrease in the number of cellular phone buyers
E) an increase in the supply of cellular phones.
36) Two brands of water, Natural Water and Mountain Water, are close substitutes. If the price
of Mountain Water decreases, the fall in price
A) shifts the demand curve for Natural Water rightward.
B) shifts the demand curve for Natural Water leftward.
C) increases the price of Natural Water.
D) increases the demand for Mountain Water.
E) More information is needed to determine if the demand curve for Natural Water shifts
rightward or leftward.
37) Car insurance and cars are complements. If the price of car insurance increases, the
A) demand for cars decreases.
B) demand for cars increases.
C) quantity of cars demanded decreases.
D) quantity of cars demanded increases.
E) More information is needed to determine if the demand increases or decreases.
38) Consumers eat salsa with taco chips. The price of salsa rises. How does the increase in the
price of salsa affect the demand for taco chips?
A) It decreases the demand for taco chips.
B) It increases the demand for taco chips.
C) It has no effect on the demand for taco chips.
D) It will decrease the demand for taco chips only if taco chips are a normal good.
E) It could increase, decrease, or have no effect on the demand for taco chips, but more
information is needed to determine the impact.
39) To access Internet services, consumers must use a computer. If computer prices fall, what is
the effect on the demand for Internet services?
A) The demand for Internet services increases.
B) The demand for Internet services decreases.
C) The demand for Internet services remains unchanged.
D) The demand for Internet services could either not change or decrease but definitely will not
increase.
E) The demand for Internet services could increase, decrease, or stay the same depending on
other factors.
40) What happens to the demand for a good if a complement’s price increases?
A) The demand decreases and the demand curve shifts rightward.
B) The demand increases and the demand curve shifts rightward.
C) There is no impact on demand for the good and the demand curve does not shift.
D) The demand decreases and the demand curve shifts leftward.
E) The demand increases and the demand curve shifts leftward.
41) Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then
A) the demand for hot dogs will increase.
B) the demand for hot dog buns will decrease.
C) the quantity demanded of hotdogs will decrease.
D) the demand for hot dog buns will increase.
E) the quantity demanded of hot dog buns will increase.
42) A popular dinner among college students today is sushi, green tea, and wasabi dip so these
foods are complements. If the price of green tea increases and the price of wasabi dip increases,
what would be the effect on demand for sushi at lunch?
A) The demand for sushi would decrease.
B) The demand for sushi would be unaffected, but the price would increase.
C) The demand for sushi could increase or decrease.
D) The demand for sushi would increase.
E) The demand for sushi would be unaffected, but the price would decrease.
43) Soda and hot dogs are complements for one another. If a shortage of carbonated water leads
to an increase in the price of soda, then the
A) demand for hot dogs increases.
B) demand for hot dogs decreases.
C) quantity of hot dogs demanded increases.
D) quantity of hot dogs demanded decreases.
E) More information is needed to determine if the demand increases or decreases.
44) A student at New York University used to take the Redhound bus when she visited her
grandmother in Boston. After graduating, although the bus fare and the plane fare were the same
as they were when she was a student, with a well paid job on Wall Street she now takes the plane
to Boston to visit her grandmother. For this student, travel by Redhound bus is
A) a normal good.
B) an inferior good.
C) a substitute good.
D) a complement good.
E) a good with negative preferences.
45) If the demand for digital cameras increases when consumers’ incomes rise, then digital
cameras are
A) a normal good.
B) an inferior good.
C) a substitute for camcorders.
D) a complement to camcorders.
E) made using advanced technology.
46) If the demand for a good increases when people’s incomes increase,
A) the good is an inferior good.
B) the law of demand is violated.
C) the good’s demand curve must be slope upward.
D) the good is a normal good.
E) the good is a substitute good for an inferior good.
47) In a recession, consumers have less income to spend. As a result, if dining out is a normal
good, then which of the following would happen to the demand curve for dining out?
A) The demand curve would shift leftward.
B) The demand curve would not shift but the price of dining out would rise.
C) The effect on the demand curve is unknown.
D) The demand curve would shift rightward.
E) The demand curve would not shift but the price of dining out would fall.
48) If macaroni and cheese is an inferior good, then a decrease in income results in
A) an increase in the demand for macaroni and cheese.
B) a decrease in the demand for macaroni and cheese.
C) an increase in the supply of macaroni and cheese.
D) a decrease in the supply of macaroni and cheese.
E) Both answers A and D are correct.
49) If income increases and the demand for bus rides decreases,
A) bus rides are a normal good.
B) consumers are behaving irrationally.
C) bus rides are an inferior good.
D) bus rides are a substitute good.
E) bus rides must be a complement good with some other good.
50) Which of the following is true?
A) For an inferior good, when income increases, the demand curve shifts leftward.
B) If the price of a substitute rises, the demand curve shifts leftward.
C) If people expect the price of a good will rise in the future, the demand curve shifts leftward.
D) An increase in population shifts the demand curve leftward.
E) An increase in the cost of producing a good shifts the demand curve leftward.
51) Ramen noodles are a staple food item for many college students. Ramen noodles are very
inexpensive, easy to prepare, and can be combined easily with other foods. After students
graduate, find employment, and earn a higher income, they decrease their Ramen noodle
purchases significantly. In this case, Ramen noodles are
A) a normal good.
B) an inferior good.
C) a complement for higher income people.
D) a substitute good.
E) None of the above answers is correct.
52) Water bottlers announce that next month the price of bottled water will rise by 25 percent.
Which of the following occurs immediately?
A) The quantity of bottled water demanded increases.
B) The quantity of bottled water demanded decreases.
C) The demand for bottled water decreases.
D) The demand for bottled water increases.
E) None of the above answers is correct because it is the supply that immediately changes, not
the demand.
53) A huge 50 percent off sale on golf clubs is advertised for next week. What happens this
week in the market for golf clubs?
A) The supply of golf clubs increases.
B) The supply of golf clubs decreases.
C) The demand for golf clubs increases.
D) The demand for golf clubs decreases.
E) The demand for and the supply of golf clubs decreases.
54) You are just about to finish college and are about to start a high paying job. Because of this
new job, what is the most likely outcome in the market for cars?
A) Your demand for cars will decrease.
B) The market supply of cars will increase.
C) Your demand for cars will increase.
D) The market supply of cars will decrease.
E) The demand and the supply for cars will decrease.
55) Which of the following increases the demand for a good?
A) a rise in the price of a complement
B) the expectation that future income will be higher
C) an increase in income, assuming the good is an inferior good
D) a decrease in the number of buyers
E) a fall in the price of a substitute
56) Suppose that tattoos gained immense popularity with retired people as well as college
students. This gain in popularity best reflects which of the following influences on buying plans?
A) the price of a substitute good
B) income
C) expectations
D) preferences
E) the price of a complement good
57) Consider the market for cellular phones. Which of the following shifts the demand curve
leftward?
A) studies showing using cellular phones can cause brain cancer
B) a decrease in the price of cellular phones
C) a decrease in the quantity demanded of cellular phones
D) an increase in the services provided by cellular phones, such as text messaging
E) an increase in the price of cellular phones
58) Scooters and bicycles are substitutes. Suppose that the price of a bicycle falls. Which of the
figures above best illustrates how this fall in price affects the demand curve for scooters?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) None of the above answers is correct because the change in the price of a bicycle will affect
the supply curve not the demand curve.