Question

1. Which of the following situations best demonstrates the law of demand?

		A)        Moviegoers react to a decrease in the price of a theater ticket by seeing more movies per year.
		B)        Moviegoers see fewer movies per year due to an overall decrease in the quality of newly released motion pictures
		C)        A drought causes a decrease in the availability of pumpkins, resulting in fewer jack-o-lanterns displayed on Halloween.
		D)        An increase in the number of people writing Economics textbooks results in a decrease in average textbook prices.

3 points   

QUESTION 2

1. Suppose that college tuition is higher this year than last year and that more students are enrolled in college this year than last year. Based on this information, we can best conclude that:

		A) the law of demand is invalid
		B) despite the increase in price, quantity demanded rose due to some other factor changing.
		C)        this situation has nothing to do with the law of demand.
		D)        the demand for a college education is positively sloped.

3 points   

QUESTION 3

1. Consumers' ability to substitute among different goods explains

		A)        the law of supply.
		B)        the law of demand.
		C)        the concept of economic equilibrium.
		D)        the relationship between income and demand.

3 points   

QUESTION 4

1. If the price of movies on video falls while the price of movies on DVD remains the same, the law of demand predicts that consumers will:

		A)        substitute movies on video for movies on DVD.
		B)        substitute movies on DVD for movies on video
		C)        buy only movies on video.
		D)        buy only movies on DVD.

3 points   

QUESTION 5

1. If the price of beef falls and the price of chicken doesn't change, individuals will:

		A)        consume more of both chicken and beef.
		B)        consume less of both chicken and beef.
		C)        substitute chicken for beef.
		D)        substitute beef for chicken.

Answer 1

1. A) Moviegoers react to a decrease in the price of a theater ticket by seeing more movies per year
(This shows that price and quantity demanded are inversely related.)

2. B) despite the increase in price, quantity demanded rose due to some other factor changing.
(This best explains the situation.)

3. B) the law of demand.
(Consumers can substitute due to law of demand.)

4. A) substitute movies on video for movies on DVD
(As price of movies on video has fallen so they will be used instead of DVD.)

5. D) substitute beef for chicken.
(More beef will be consumed.)