Question 1

Given the demand schedule for Larry and Harry, what is the total market demand for hot dogs at a price of $1.80?

Accepted Answer

$$10 + 15 = 25$$

Question 2

If the price of hot dogs falls from $$1.80 to 0.20$$, by how much does the total market demand increase?

Accepted Answer

$$(25 + 30) - (10 + 15) = 55 - 25 = 30$$

Question 3

Which of the following best describes the market demand curve for hot dogs based on the data provided?

Accepted Answer

It is the horizontal sum of the individual demand curves of Larry and Harry.

Question 4

Suppose the price of hot dogs is $0.20. What is the total market demand at this price?

Accepted Answer

$$25 + 30 = 55$$

Question 5

If Larry’s demand for hot dogs is given by $$Q_L = 30 - 10P$$ and Harry’s demand is $$Q_H = 40 - 15P$$, what is the equation for the market demand curve?

Accepted Answer

$$Q_M = (30 - 10P) + (40 - 15P) = 70 - 25P$$

Question 6

If the market demand curve is $$Q = 70 - 25P$$, what is the price when the total market demand is 25 units?

Accepted Answer

$$P = \frac{70 - 25}{25} = 1.8$$

Question 7

Which of the following statements is TRUE regarding the construction of the market demand curve?

Accepted Answer

The market demand curve is constructed by summing the quantities demanded by all consumers at each price.

Question 8

If the price of hot dogs increases, what happens to the quantity demanded according to the law of demand?

Accepted Answer

The quantity demanded decreases.

Question 9

Suppose a third consumer, Sally, enters the market and her demand at $$P = 1.80 is 5 $$and at $$P = 0.20 is 20. $$What is the new total market demand at $$P = 0.20$$?

Accepted Answer

$$25 + 30 + 20 = 75$$

Question 10

If the market demand curve shifts to the right, which of the following could be a possible cause?

Accepted Answer

An increase in the number of consumers in the market.

Question 11

If Larry’s demand for hot dogs is perfectly inelastic, how would his demand curve appear on the graph?

Accepted Answer

A vertical line at Larry’s quantity demanded.

Question 12

If the price elasticity of demand for hot dogs is $$-0.5$$, what does this imply about consumer responsiveness?

Accepted Answer

Demand is inelastic; consumers are not very responsive to price changes.

Question 13

If the market demand curve is $$Q = 70 - 25P$$, what is the maximum quantity demanded in the market?

Accepted Answer

$$Q_{max} = 70 ($$when $$P = 0)$$

Question 14

If the price of hot dogs is set above $$1.80$$, what will be the total market demand according to the data?

Accepted Answer

Total market demand will be less than 25 or possibly zero.

Question 15

If the market demand curve is linear and downward sloping, which of the following is true?

Accepted Answer

As price decreases, quantity demanded increases.

Question 16

If Larry and Harry have identical demand curves, how would the market demand curve compare to their individual curves?

Accepted Answer

The market demand curve would be twice as far to the right as an individual’s demand curve.

Question 17

If the price of hot dogs is $$1.00$$ and Larry demands 18 hot dogs while Harry demands 22, what is the total market demand?

Accepted Answer

$$18 + 22 = 40$$

Question 18

If the market demand curve is $$Q = 70 - 25P$$, what is the price at which the market demand falls to zero?

Accepted Answer

$$P = \frac{70}{25} = 2.8$$

Question 19

If the market demand for hot dogs at $$P = 0.20 is 55$$, and the price increases to $$P = 1.80$$, what is the percentage decrease in market demand?

Accepted Answer

$$\frac{55 - 25}{55} 	imes 100\% = 54.5\%$$

Market Demand and Individual Demand Curves: Hot Dog Market Example

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