PRACTICE QUESTIONS

Question 1: What is wrong with the statement: Demand refers to the willingness of buyers to
purchase different quantities of a good at different prices during a specific time period:

1. Instead of “demand”, it should be “quantity demanded”.

2. Instead of “willingness”, it should be “ability”.
3. Demand refers to the willingness and ability of buyers, not just willingness.
4. There is nothing wrong with the statement.

Question 2: _______________ refers to the willingness and ability of buyers to purchase

different quantities of a good at different prices during a specific time period whereas
__________________ refers to a specific number of units buyers want to buy at a specific price.

Question 3: True or False: As the price of apples rises, the demand for apples falls, ceteris
paribus.

Question 4: The price of 1 kg apples, which was $5 last month, is $6 today.

 True or False: The demand curve for apples must have shifted rightward between last month
and today.

Question 5: Suppose that Carlos and Deborah are the only consumers of scented candles in a
particular market. The following table shows their annual demand schedules:

Find the market demand schedule.

Question 6: Consider the demand curve for Sedans in the United States. For simplicity, assume
that all sedans are identical and sell for the same price. Also, assume that:

The current market price of Sedans is $30,000

Average Household income is $60,000 per year
Price of a gallon of gas is $5 per gallon
 Price of a subway ride is $2.50

Suppose the price of a sedan decreased from $30,000 to $25,000. This would cause a
________________ the demand curve.

If an increase in average income causes a rightward shift of the demand curve, then you may
conclude that sedans are a _____________ good.

Suppose that the price of a gallon of gas rises from $5 to $6. Because sedans and gasoline are
_____________, an increase in the price of a gallon of gas shifts the demand curve for sedans
to the ____________.

Question 7: Consider the supply curve for sedans in an imaginary market. For simplicity,
assume that all sedans are identical and sell for the same price. Two factors that affect the
supply of sedans are the level of technical knowledge – in this case, the speed with which
manufacturing robots can fasten bolts, or robot speed – and the wage rate that auto
manufacturers must pay their employees. Initially, the robots can fasten 2500 bolts per hour,
autoworkers earn $25 per hour, the price of a sedan is $30,000 and the quantity supplied
(Sedans per month) is 250.

Suppose that the price of a sedan decreases from $30,000 to $25,000. This would cause the
______________ of sedans to decrease, which is reflected on the graph by a _______________
supply curve.

Following a technological decline – for example, a decrease in the speed with which robots can
attach bolts to cars – there is a __________________ shift of the supply curve because the
technological decline makes cars more expensive to build.

Question 8: Consider the market for cereal in San Francisco, where there are over a thousand
stores that sell cereal at any given moment. Suppose the Surgeon General issues a public
statement saying that consuming cereal is bad for your health.

Holding all else constant, this will lead to a:

a) Change in Demand
b) Change in Supply
c) Change in Demand and Change in Supply
d) No change in Demand and Supply
Question 9: Consider the market for hamburgers in Dallas, where there are over a thousand
burger joints at any given moment. Suppose an innovation in meat processing technology
makes it possible to produce more hamburgers at a lower cost than ever before.

Holding all else constant, this will lead to a:

a) Change in Demand
b) Change in Supply
c) Change in Demand and Change in Supply
 d) No change in Demand and Supply

Question 10: Consider the market for laptops in 2015. Between 2015 and 2016, the equilibrium
price of laptops remained constant, but the equilibrium quantity of laptops increased. From
this, you can conclude that between 2015 and 2016, the supply of laptops ________________
and the demand for laptops _______________(draw Diagram).

Question 11: With respect to each of the following changes, identify whether the demand
curve will shift leftward or rightward.
a) An increase in income (the good under consideration is an inferior good)
b) A rise in the price of a complementary good
c) A fall in the price of a substitute good
 d) A rise in the number of buyers

Question 12: Why might a movie theater charge a lower admission price for the first show on
weekday afternoons than they do for a weeknight or weekend show?
a) Demand is lower for the weekday afternoon showing of the movie than for the weeknight or
weekend showing.
b) The supply of seats in the theater is greater on a weekday afternoon and the demand to see
the movie is lower for the weekday afternoon showing.
c) Theaters like to show with the lower prices that they want every income group to attend
their movies.
d) The supply of seats in the theater is greater on a weekday afternoon.

Question 13: Indicate how each of the following will affect the current supply (Increase supply
or Decrease Supply) for personal computers.

a) A rise in wage rates

b) An increase in the number of sellers of computers
c) A tax placed on the production of computers
d) A subsidy placed on the production of computers