4.1.3.1 The determinants of the demand for goods and services Quiz: AQA Economics, Unit 1

The 20 questions

1. A demand curve shows the relationship between:

   • price and quantity demanded, other things being equal.
   • price and quantity supplied, other things being equal, so that the curve describes how sellers respond to price changes in the market.
   • income and the price level in the economy, which is the relationship that the demand curve uses to explain changes in prices over time.
   • output and the number of workers employed by firms in each sector, measured over the course of a business cycle in the economy.

2. Which of the following would cause a shift of the demand curve for a good to the right?

   • A rise in the price of the good itself.
   • A fall in the number of consumers in the market.
   • A rise in consumer incomes for a normal good.
   • A rise in the price of a complementary good, such as petrol for cars.

3. Which of the following is a determinant that causes a movement along the demand curve rather than a shift?

   • A change in the price of a substitute, which changes the demand for the good at each price level in the market.
   • A change in population, which increases the number of buyers in the market and so shifts the demand curve for the good.
   • A change in the price of the good itself.
   • A change in consumer tastes, which alters the willingness of buyers to purchase the good at every price in the market over time.

4. A rise in the price of tea, a substitute for coffee, is likely to:

   • shift the demand curve for coffee to the left.
   • cause a movement down the demand curve for coffee.
   • have no effect on the demand for coffee.
   • shift the demand curve for coffee to the right.

5. A rise in the price of printers is likely to shift the demand curve for ink cartridges:

   • to the left, because printers and cartridges are complements.
   • to the right, because printers and cartridges are substitutes.
   • not at all, because the two goods are unrelated.
   • to the right, because cartridges are a normal good.

6. A rise in consumer tastes in favour of organic food is most likely to:

   • shift the demand curve for organic food to the right.
   • move the market along the demand curve for organic food.
   • shift the supply curve for organic food to the left.
   • shift the demand curve for organic food to the left.

7. If consumers expect the price of a good to rise next month, the current demand for the good is likely to:

   • become perfectly price inelastic.
   • remain unchanged, because expectations do not affect demand.
   • rise, because consumers buy now before prices increase.
   • fall, because consumers wait for lower prices.

8. Which of the following would cause a fall in the demand for a good that is inferior?

   • A rise in consumer incomes.
   • A fall in consumer incomes.
   • A fall in the price of a substitute.
   • A rise in the good's own price.

9. A change in the size of the population is most likely to affect the demand curve by:

   • having no impact on any market, since population changes affect only the labour market and not the demand for goods and services.
   • shifting the supply curve, because more firms need capital to expand their production capacity in response to the larger population.
   • shifting the demand curve, because more consumers are willing to buy at each price.
   • moving along the curve as prices change, so that the quantity demanded rises or falls with the price of the good in the market.

10. Which statement correctly distinguishes an extension of demand from an increase in demand?

    • An extension is a shift of the curve; an increase is a movement along it, so both describe a change in the curve's position.
    • An extension is a movement along the curve after a price fall; an increase is a shift of the whole curve.
    • Both are shifts of the supply curve, so that neither term describes a change in the quantity demanded by consumers in the market.
    • Both are movements along the same curve, which means that the terms extension and increase describe the same change in quantity demanded.

11. Which of the following best explains why the demand curve for a good usually slopes downwards?

    • Because firms supply less when prices are low, which means that the quantity sold in the market falls as the price falls.
    • Because lower prices reduce the total utility of the good, so that consumers have less reason to buy the product at a low price.
    • Because at lower prices more consumers can afford the good and existing buyers purchase more, given diminishing marginal utility.
    • Because the good is always an inferior good, so that demand falls as the price falls and the consumer has less need for it.

12. A government announces that smoking will be banned in public places. Which factor affecting demand for cigarettes is most directly changed?

    • The supply of tobacco, which shifts demand to the right because more tobacco is produced in the country when the ban is announced.
    • The income of smokers, which shifts demand to the right because smokers have more money to spend on products of this kind.
    • The availability of cigarettes, which shifts demand to the left.
    • The price of cigarettes, which rises as the government adds restrictions on where products can be sold in the market.

13. Which of the following statements is an evaluation of the claim that demand is determined solely by price?

    • The claim is correct only for inferior goods, where demand depends on price alone and not on income, tastes or expectations of buyers.
    • The claim is correct because price is the only determinant of demand, and all other factors affect supply rather than demand in the market.
    • The claim is incomplete, because income, tastes, substitutes, complements and expectations also shift demand.
    • The claim is incorrect because demand never depends on price, so that price changes have no effect on the quantity that consumers buy.

14. A rise in the price of a complementary good for car owners is most likely to:

    • increase demand for cars, because car owners will switch to cars that are cheaper to run when complementary goods become more expensive.
    • decrease demand for cars, because the total cost of owning a car rises.
    • leave demand for cars unchanged, since complementary goods have no effect on the buyers of cars in the market at any price.
    • increase demand for petrol, because car owners will drive more when the price of their complementary goods rises in the market.

15. Which of the following would be the best example of a change in the price of a good itself causing a change in quantity demanded?

    • A rise in the price of bread from £1 to £1.20, reducing the quantity of bread bought.
    • A rise in household incomes, increasing the quantity of bread bought because households can afford to buy more of each good they want.
    • A change in tastes, causing people to buy more bread because they have come to prefer the taste of bread over other foods in the shops.
    • A rise in the price of flour, shifting the demand curve for bread because flour is a main ingredient of bread in bakeries.

16. Which of the following would cause the demand curve for a luxury good to shift to the right?

    • A fall in consumer incomes.
    • A fall in the good's own price.
    • A rise in consumer incomes.
    • A rise in the price of a substitute.

17. Which statement best explains why a change in consumer expectations can shift demand before any price change occurs?

    • Because consumers change their willingness to buy at each price, based on expected future conditions.
    • Because expectations are unrelated to demand, since consumers base their purchases only on the price and income they have at the time.
    • Because expectations change the cost of production immediately, so firms adjust output before any change in demand is seen.
    • Because expectations change only the supply of goods, which means that consumers do not alter the amount they buy at any price.

18. A rise in the price of a substitute good and a fall in consumer incomes both affect the demand for a normal good. What is the likely combined effect if the substitute price rise is large and the income fall is small?

    • Demand may rise overall if the substitute effect dominates, though the income fall works in the opposite direction.
    • Demand rises, because both effects increase demand for the normal good in the market, so that the total demand for the product grows.
    • Demand falls, because substitutes always reduce demand for the normal good, and falling income cuts purchases further.
    • Demand is unchanged because the two effects always cancel exactly, so total demand for the normal good stays the same.

19. Why is it important for firms to understand the determinants of demand?

    • Because demand curves are fixed and never change, so that firms need only learn the demand curve once and can use it for every year.
    • Because knowing what shifts demand helps firms forecast sales and plan pricing and output.
    • Because demand determinants have no influence on sales, which means that firms can ignore them when planning their marketing and output.
    • Because demand determinants decide the cost of production, so firms need demand only to calculate their production costs.

20. Which of the following best describes a demand curve for a normal good that has shifted to the left?

    • Consumers are willing to buy more at each price, so that the demand curve has moved outwards to the right in the market.
    • Consumers are willing to buy less at each price than before.
    • The good has become a substitute for another good, so that the demand curve for it has shifted left in response to the price change.
    • Consumers have moved along the curve to a higher quantity, which means that the price of the good has fallen in the market.

Related quizzes

• Economic methodology Quiz · 4.1.1.1 · 20 questions
• The nature and purpose of economic activity Quiz · 4.1.1.2 · 20 questions
• Economic resources Quiz · 4.1.1.3 · 20 questions
• Scarcity, choice and the allocation of resources Quiz · 4.1.1.4 · 20 questions
• Production possibility diagrams Quiz · 4.1.1.5 · 20 questions
• Consumer behaviour Quiz · 4.1.2.1 · 20 questions
• Imperfect information Quiz · 4.1.2.2 · 20 questions
• Aspects of behavioural economic theory Quiz · 4.1.2.3 · 20 questions
• Behavioural economics and economic policy Quiz · 4.1.2.4 · 20 questions
• Price, income and cross elasticities of demand Quiz · 4.1.3.2 · 20 questions