Demand worksheet
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Demand
1.Fill in the missing blanks, from the following words: rise, more, expensive, price, risen, inverse, quantity, increase.
In a free market, resources are allocated by supply and demand. Demand can be described as the __________ of a good or service that a consumer is willing and able to purchase at any given __________. A demand curve illustrates the relationship between quantity demanded and price. As prices fall, we see a _______________ in quantity demanded, or put another way the _______________ relationship between price and quantity demanded is to consider the income and substitution effects. The income effect occurs when prices falls and so people will be able purchase __________ of the good or service and so their real income has ____________. The substitution effect occurs when price falls and so alternative substitute goods are now relatively more ________________. So people switch away from substitutes and demand more of this good or service.
2. Match each term with one of the definitions in the opposite column
Term | Definition | ||
2.1 | An inferior good is | A | When there is a movement along the demand curve resulting in higher quantity demanded. |
2.2 | An extension in demand | B | When the relationship between price and the quantity demanded is inverse. |
2.3 | Contraction in demand | C | When an increase in income leads to a fall in demand. |
2.4 | The law of demand is | D | When there is a movement along the demand curve resulting in lower quantity demanded. |
2.5 | A normal good is | E | A good or service with a direct relationship between income and demand, e.g. when an increase in income leads to an increase in demand. |
3. Are the following true or false?
- Demand curves always slope downwards.
- A change in price will cause an extension or contraction along the demand curve
- If the price of football matches falls, one would expect sales of football tickets to increase.
- Without ceteris parabus the demand curve will shift.
- A good that has a zero price will have zero demand.
4. Multiple choice
Question | Possible answers | ||
| 4.1 | In the resource market, demand for labour is from | A | Firms |
B | Households | ||
C | Only the government | ||
| 4.2 | In the goods market, demand is from | A | Firms |
B | Households | ||
C | Only the government | ||
| 4.3 | The London 2012 Olympics Games has seen an increase in demand for construction. If demand for construction workers is derived from this, what would you expect to happen to it in 2013? | A B C | Increase Decrease Stay the same |
5. Multiple choice
| Question | Possible answers | Key | ||
| 5.1 | Which of the following would you expect to shift the demand curve for cars to the right? | A | An increase in public transport prices. | |
| B | A fall in the price of cars. | |||
| C | A rise in petrol prices. | |||
| 5.2 | Which of the following would you expect to shift the demand curve for alcohol to the left? | A | Medical research which links alcohol with heart disease. | |
| B | An increase in indirect tax on alcohol. | |||
| C | An increase in real income. | |||
| 5.3 | A rise in wages from increased demand for labour might be caused by: | A | A rise in demand for the firms’ final products. | |
| B | A fall in the price of a substitute input, like capital. | |||
| C | An increase in population. |
6. State the concept defined in each of the situations below:
6.1 A good whose demand increases when income falls.
6.2 A line showing the quantity of a good or service that people are willing and able to buy at any given price.
6.3 A good whose demand falls when income falls.
7. Evaluation – how can the following determine the shift in demand and the resulting price change?
7.1 The size of the change
7.2 Long versus short-run
7.3 Other things are not equal, such as the prices of complements and substitutes
8. Data response – Record leap for house prices
Halifax figures suggest that house prices are rising at an annual rate of 30%. "Last month's record rise in prices underlines the continuing strength of the U.K. housing market as the low level of interest rates and falling unemployment drives up demand," said the chief economist at Halifax. With interest rates at record lows, many individuals are investing in housing rather than the stock market. However, there is some confusion over how fast prices are now rising - and whether they are slowing down. A rival survey by the Nationwide suggested that house prices only rose by 1.4% in October, although the overall rate for the year was 24%. Other surveys have suggested that the housing market is softening at the top end of the market in London, where City firms have made big cuts in their bonus payments.
8.1 With reference to the extract, give two reasons for the rise in house prices.
8.2 Discuss why demand for housing might be “softening at the top end of the market in London”?
Demand worksheet 
Demand worksheet
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