1.2.2 Demand Quiz: Pearson Edexcel Economics A, Unit 1

The 20 questions

1. What is the law of demand?

   • Other things being equal, a fall in price leads to an increase in quantity demanded, and vice versa.
   • Quantity demanded is always equal to the quantity supplied at every price in the market.
   • A rise in price always leads to an increase in quantity demanded by consumers in the market.
   • Demand is fixed regardless of price, so changes in price affect only the quantity supplied.

2. A movement along a demand curve is caused by:

   • A change in the price of a substitute good, which shifts demand for the good.
   • A change in the price of the good itself.
   • A change in consumer incomes, which shifts the whole demand curve to a new position.
   • A change in consumer tastes, which changes the willingness to buy at every price.

3. A shift of the demand curve to the right is caused by:

   • A fall in the price of the good, which raises quantity demanded along the curve.
   • A rise in consumer incomes for a normal good.
   • A rise in the price of the good itself, which reduces quantity demanded.
   • A rise in the cost of producing the good, which affects the supply curve instead.

4. Which of the following would cause demand for a good to shift to the left?

   • A fall in the price of a substitute good, since consumers switch away from the original good.
   • A fall in the price of a complement, which makes the joint purchase cheaper for consumers.
   • A rise in consumer incomes for a normal good, which increases demand at every price.
   • A rise in the number of consumers, which increases the total demand for the good in the market.

5. What is meant by diminishing marginal utility?

   • Marginal utility is always constant, so each extra unit gives the same satisfaction whatever the quantity.
   • As more units of a good are consumed, each extra unit adds more satisfaction than the one before.
   • As more units of a good are consumed, each extra unit adds less satisfaction than the one before.
   • Total utility falls as consumption rises, so consumers always prefer less of every good in the economy.

6. How does diminishing marginal utility help explain the shape of the demand curve?

   • Consumers are willing to pay less for each extra unit, so demand curves slope downwards as quantity increases.
   • Consumers buy the same amount at every price, so demand curves are vertical lines in the market.
   • Consumers are willing to pay more for each extra unit, so demand curves slope upwards as quantity increases.
   • Consumers buy fewer units as they consume more, so demand is independent of the marginal utility gained.

7. Which of the following is a condition of demand, that is, a factor that shifts the demand curve?

   • The price of the good itself, which moves consumers along the same demand curve.
   • The cost of raw materials used to produce the good in the market.
   • The price of a complement good.
   • The quantity of the good supplied by firms to the market.

8. The price of a good falls and the quantity demanded rises. Which description is correct?

   • There is a movement down along the same demand curve, to a larger quantity demanded.
   • There is no change in quantity demanded, since demand depends only on consumer tastes and incomes.
   • There is a shift of the demand curve to the left, since consumers have less money to spend.
   • There is a shift of the demand curve to the right, due to the lower price of the good itself.

9. A government advertising campaign changes consumer tastes so that more people want a product at every price. What happens to the demand curve?

   • It moves up along the same curve, since the price of the product has risen in the market.
   • It shifts to the right, since demand at every price is higher.
   • It shifts to the left, since consumers now want less of the product at every price.
   • It does not change, because tastes affect supply rather than demand in the economy.

10. Which statement about normal goods is correct?

    • Demand for a normal good falls when consumer income rises, so the demand curve shifts left.
    • Demand for a normal good rises when price rises, which means the curve slopes upwards.
    • Demand for a normal good rises when consumer income rises, so the demand curve shifts right.
    • Demand for a normal good is unaffected by income, so the demand curve stays in the same position.

11. Explain why the demand curve for a good slopes downwards from left to right.

    • Lower prices reduce consumer incomes, so consumers can only buy less of the good in every case.
    • Higher prices increase the utility of the good, so consumers buy more of it at higher prices.
    • The curve slopes downwards only because suppliers reduce output as the price of the good falls in the market.
    • Lower prices make the good cheaper relative to others and each extra unit gives less utility, so consumers buy more at lower prices.

12. A consumer's demand for a product falls when a new health warning is published, even though the price stays the same. What is the appropriate analysis?

    • The demand curve shifts to the left, because the warning changes the willingness to buy at every price.
    • There is a movement up along the demand curve, since the warning raises the effective price of the product.
    • There is no change in demand, since only price can affect the demand curve in any market.
    • The demand curve shifts to the right, since the warning makes the product more attractive to consumers.

13. Which of these would be a movement along the demand curve for cinema tickets?

    • A change in the popularity of a new film, which increases attendance at every price level.
    • A fall in the ticket price from 10 pounds to 8 pounds, which raises the number of tickets demanded.
    • A rise in the price of streaming subscriptions, which makes cinema tickets relatively more attractive.
    • A rise in average incomes, which causes more people to attend the cinema at every price.

14. Evaluate the claim that diminishing marginal utility fully explains why demand curves slope downwards.

    • It is the complete explanation, since diminishing marginal utility is the only factor that affects quantity demanded.
    • It is irrelevant, since demand curves slope downwards only because of government regulation of prices.
    • It is wrong, because diminishing marginal utility means demand curves should slope upwards in every market.
    • It is a key reason, but the income and substitution effects also contribute, so the explanation is important but not the whole story.

15. A firm finds that quantity demanded for its product rises by 10 per cent when consumer incomes rise by 5 per cent. What does this suggest about the demand curve?

    • The demand curve does not change, since only changes in the product's price can affect quantity demanded.
    • The demand curve shifts to the left, since the increase in income has reduced demand for the product.
    • The demand curve becomes vertical, since quantity demanded is now fixed regardless of the price of the product.
    • The demand curve shifts to the right, since demand at each price has risen following the increase in income.

16. Which of the following best explains why a demand curve can shift even when the price of the good stays unchanged?

    • Changes in the amount of the good already in stock, which affect how much consumers choose to buy.
    • Changes in the conditions of demand, such as income, tastes or the prices of related goods, change the quantity demanded at each price.
    • Changes in the cost of producing the good, which change the level of supply rather than demand.
    • Changes in the number of firms selling the good, which affect the supply side of the market.

17. A demand curve is drawn for a product in a market. Which statement correctly distinguishes between a movement along the curve and a shift of it?

    • A movement along the curve and a shift of the curve are both caused by changes in the good's own price in the market.
    • A movement along the curve is caused by a change in the good's own price, while a shift is caused by a change in a non-price factor.
    • A movement along the curve is caused by a change in income, while a shift is caused by a change in the good's price.
    • A movement along the curve is caused by a change in supply, while a shift is caused by a change in the number of buyers.

18. Which factor would shift the demand for a good to the left?

    • A fall in the price of a substitute good, which makes the substitute cheaper to buy than the original.
    • A rise in the number of consumers buying the good in the market at every price level.
    • A rise in incomes for a normal good, which increases the quantity demanded at each price in the market.
    • A rise in the price of a complement, which makes the good cheaper relative to the complement.

19. A rise in the price of coffee leads to higher demand for tea. What is the relationship between coffee and tea?

    • They are inferior goods, so demand for both falls whenever the price of either rises.
    • They are unrelated goods, so changes in one price cannot affect demand for the other.
    • They are substitutes, so a price rise in one increases demand for the other.
    • They are complements, so a price rise in one reduces demand for the other.

20. Which of the following best describes a contraction of demand?

    • A rise in quantity demanded caused by a fall in the price of a complement, shown as a rightward shift.
    • A rise in demand caused by a change in tastes, shown as a movement down the same curve.
    • A fall in demand at every price caused by a fall in consumer incomes, shown as a leftward shift.
    • A fall in quantity demanded caused by a rise in the good's own price, shown as a movement up the curve.

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