Question 1

Which of the following best describes the difference between a 'change in quantity demanded' and a 'change in demand'?

Accepted Answer

A change in quantity demanded is caused by a change in price, while a change in demand is caused by changes in other factors such as income or the price of related goods.

Question 2

Given the demand function $D = 8 - 2p + m$, what is the reservation price when $m = 4$?

Accepted Answer

$p = 6$

Question 3

If the demand for Product X is given by $D = 10 - 2P_X - 3P_Y + 5M$, what type of relationship does Good Y have with Good X?

Accepted Answer

Substitute in consumption

Question 4

Suppose the demand for Product X is $D = 10 - 2P_X + 3P_Y - 5M$. If the price of Good Y increases, what happens to the demand for Product X?

Accepted Answer

Demand for Product X increases because Good Y is a substitute in consumption.

Question 5

Why do demand curves typically slope downwards?

Accepted Answer

Because of diminishing marginal benefits as more units are consumed.

Question 6

Given the demand function $D = 8 - 2p + m$, what is the quantity demanded when $p = 2$ and $m = 8$?

Accepted Answer

$D = 12$

Question 7

If the reservation price is defined as the price at which quantity demanded is zero, what is the reservation price for the demand function $D = 8 - 2p + m$ when $m = 8$?

Question 8

Suppose the demand for Product X is $D = 10 - 2P_X - 3P_Y + 5M$. If income $M$ increases, what happens to the demand for Product X?

Accepted Answer

Demand increases because the coefficient on $M$ is positive.

Question 9

Which of the following would cause a shift in the demand curve for a product?

Accepted Answer

A change in consumer income.

Question 10

If the demand for Product X is $D = 10 - 2P_X + 3P_Y - 5M$, and income $M$ increases, what type of good is Product X?

Accepted Answer

Inferior good

Question 11

Given the demand function $D = 8 - 2p + m$, if $m$ increases from 4 to 8, what happens to the demand curve?

Accepted Answer

The demand curve shifts to the right by 4 units.

Question 12

If the price of a substitute good increases, what is the expected effect on the demand for the original good?

Accepted Answer

The demand for the original good increases.

Question 13

Suppose the demand for Product X is $D = 10 - 2P_X - 3P_Y + 5M$. If $P_X$ increases by 1, what is the change in quantity demanded?

Accepted Answer

Quantity demanded decreases by 2 units.

Question 14

Which of the following is an example of a complement in consumption?

Accepted Answer

Coffee and sugar

Question 15

If the demand for Product X is $D = 10 - 2P_X + 3P_Y - 5M$, and $P_Y$ increases by 2, what is the change in demand for Product X?

Accepted Answer

Demand increases by 6 units.

Question 16

Which of the following best describes the reservation price in the context of a demand curve?

Accepted Answer

The price at which the quantity demanded is zero.

Microeconomics Study Notes: Demand and Equilibrium

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