Q: Suppose the price of movie tickets increases from $$10 to 12$$, and as a result, the quantity demanded falls from 100 to 80 tickets. What is the percentage change in quantity demanded?

$$ \frac{80-100}{100} \times 100 = -20\% $$

Question 1

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with many buyers and sellers, all firms selling identical products, and no barriers to new firms entering the market.

Question 2

Suppose the price of coffee increases. According to the substitution effect, what is likely to happen to the quantity demanded of tea, assuming tea is a substitute for coffee?

Accepted Answer

The quantity demanded of tea will increase.

Question 3

If the demand for ramen noodles decreases as consumers' incomes rise, ramen noodles are considered:

Accepted Answer

An inferior good

Question 4

Which of the following would cause a movement along the demand curve for ice cream, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of ice cream

Question 5

If the price of peanut butter rises and, as a result, the demand for jelly falls, what is the relationship between peanut butter and jelly?

Accepted Answer

They are complementary goods.

Question 6

Which of the following scenarios best illustrates the income effect?

Accepted Answer

A decrease in the price of laptops makes consumers feel wealthier, so they buy more laptops.

Question 7

Suppose the demand curve for a product shifts to the right. Which of the following could explain this shift?

Accepted Answer

An increase in the population of buyers

Question 8

If the price of a product increases and the quantity demanded decreases, this is an example of:

Accepted Answer

The law of demand

Question 9

Which of the following would NOT cause the demand curve for pizza to shift?

Accepted Answer

A change in the price of pizza

Question 10

Suppose a pandemic causes consumers to expect lower future incomes. What is the likely effect on the current demand for new cars (a normal good)?

Accepted Answer

The demand for new cars will decrease.

Question 11

If the demand for a good increases when the price of another good rises, these two goods are:

Accepted Answer

Substitutes

Question 12

A demand schedule shows:

Accepted Answer

The relationship between the price of a product and the quantity of the product demanded.

Question 13

Which of the following equations best represents the law of demand?

Accepted Answer

$$ Q_d = f(P) $$ where $$ Q_d $$ decreases as $$ P $$ increases

Question 14

If the price of a normal good falls, what two effects combine to increase the quantity demanded?

Accepted Answer

The income effect and the substitution effect

Question 15

Suppose the price of movie tickets increases from $$10 to 12$$, and as a result, the quantity demanded falls from 100 to 80 tickets. What is the percentage change in quantity demanded?

Accepted Answer

$$ \frac{80-100}{100} 	imes 100 = -20\% $$

Question 16

Which of the following is most likely to cause a leftward shift in the demand curve for air travel?

Accepted Answer

A decrease in consumer incomes during a recession

Question 17

If the demand for public transportation increases when gasoline prices rise, what is the relationship between public transportation and gasoline?

Accepted Answer

They are substitute goods.

Question 18

A change in which of the following will NOT shift the demand curve for a product?

Accepted Answer

Price of the product itself

Question 19

Suppose a new health study reveals that eating avocados significantly improves heart health. What is the likely effect on the demand curve for avocados?

Accepted Answer

The demand curve will shift to the right.

Question 20

If the population of a city increases, what is the likely effect on the market demand for housing in that city?

Accepted Answer

The demand curve for housing will shift to the right.

Chapter 3: Where Prices Come From — The Interaction of Demand and Supply

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