Economics

Hudson Falls Central School

Mr. Nassivera – Room A1

Demand Questions for Review

Law of Demand:
1. What is the law of demand?

2. Give two examples of how you have observed the law of demand at work, school,
or in the “real world.”

3. How is the law of Demand related to the demand curve?

Changes in Demand:
1. What variables influence a demand for a normal good?

2. Explain why a reduction in the price of a normal good does not increase the
demand for that good?

Substitution and Income Effects:

1. Distinguish between the substitution and income effects of a price change. If a
good’s price increases does each effect have a positive or negative impact on the
quantity demanded?

Demand:
1. Explain the effect of an increase in consumer income on demand for a good.

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 Economics
Hudson Falls Central School
Mr. Nassivera – Room A1

Shifting Demand:
Using supply and demand curves, show the effect of each of the following events on the
market for cigarettes.
a. A cure for lung cancer is found.
b. The price of cigars increases
c. Wages increase substantially in states that grow tobacco.
d. A fertilizer that increases the yield per acre of tobacco is discovered.
e. There is a substantial increase in the price of matches and lighter fluid.
f. More states pass laws restricting smoking in public places.

Substitutes and Compliments:

For each of the following pairs, determine whether the goods are substitutes,
compliments, or unrelated.
a. Peanut Butter and Jelly __________________________
b. Private and public transportation __________________________
c. Coke and Pepsi __________________________
d. Alarm clocks and automobiles __________________________
e. Golf clubs and golf balls __________________________

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 Economics
Hudson Falls Central School
Mr. Nassivera – Room A1

Web Questions
1. Go to the U.S. Census Bureau’s home page ( www.census. gov ) and navigate to
the population pyramids for 2000, for 2025, and for 2050. What is projected to
happen to the age distribution in the United States? Other things constant, what
do you expect will happen in the next 50 years to the relative demand and supply
for each of the following, being careful to distinguish between shifts of and a
movement along a curve:

a. Nursing homes.

b. Prescription medication.

c. Baby high chairs.

d. College education.

2. Go to the Energy Information Administration’s home page ( www.eia.doe.gov ) and

look up its most recent “Short-Term Energy Outlook” and answer the following
questions:

a. List the factors that are expected to affect demand and supply for energy in the
near term. How will each affect demand? Supply

b. What is the EIA’s forecast for world oil prices? Show graphically how the factors
listed in your answer to a are consistent with the EIA’s forecast. Label all shifts in
demand and supply.

c. Describe and explain EIA’s forecast for the price of gasoline, heating oil, and
natural gas. Be sure to mention the factors that are affecting the forecast.

3. Go to the Tax Administration home page ( www.taxadmin.org ) and look up sales

tax rates for the 50 U.S. states.

a. Which states have no sales tax? Which state has the highest sales tax?

b. Show graphically the effect of sales tax on supply, demand, equilibrium quantity,
and equilibrium price.

c. Name two neighboring states that have significantly different sales tax rates. How
does that affect the supply or demand for goods in those states?

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