Catherine Zulueta
3.1.5 Practice
AP Microeconomics
1.
● What is the relationship between these variables? (3 points)
There is an inverse relationship between the variables of price and quantity demanded. When
price goes up, quantity demanded goes down and vice versa.
● What does quantity demanded mean? (3 points)
Quantity demanded means the total amount of goods and services that people are willing to buy
at a certain price and time.
● How does the concept of ceteris paribus apply to the law of demand? (3 points)
The law of demand states that there is an inverse relationship between price and quantity
demanded. However, all variables must be held constant (ceteris paribus) in order for the law of
demand to work.
● Draw a hypothetical demand curve. Completely label your graph. (3 points)
● Explain in words how your drawing of a demand curve in part D demonstrates the law of
demand you stated in part A. (3 points)
The drawing demonstrates the law of demand because a decrease in price from P1 to P2
results in an increase in quantity demanded from Q1 to Q2.
2. Economists divide consumer responses to a change in price into two categories: the
income effect and the substitution effect. Explain each. (5 points)
The income effect describes how changes to consumers’ real income levels can affect their
purchasing patterns. The substitution effect is the decrease in sales for a product that can be
attributed to consumers switching to cheaper alternatives when its price rises.
3. To communicate clearly,economists distinguish between a change in demand and a
change in quantity demanded.
● What is the only thing that can cause a change in the quantity demanded for a good? (3
points)
Only the price of the particular good can cause a change in the quantity demanded for a good.
, ● Draw a hypothetical demand curve, and illustrate a decrease in quantity demanded on
your graph. (3 points)
● A change in demand is caused by a change in one of the ___________.
(3 points)
A change in demand is caused by a change in one of the determinants of demand.
● Draw a hypothetical demand curve, and illustrate a decrease in demand on your graph.
(3 points)
4. Does inflation cause a change in demand? Explain the role of inflation in determining
demand. (3 points)
Inflation does not affect demand. Because inflation causes prices and wages to increase,
people’s income and purchasing power stays the same and the demand does not change.
5. Consumer goods
● Goods are classified as normal goods and inferior goods. Explain and give an
example of each. (5 points)
Normal goods are goods that experience an increase in demand, due to an increase in
consumers' income. Examples of normal goods are food, clothing, and household necessities.
Inferior goods are goods whose demand drops when people's incomes rise. Examples of
inferior goods are store brand goods, cheaper meals like instant noodles, and used clothing.
3.1.5 Practice
AP Microeconomics
1.
● What is the relationship between these variables? (3 points)
There is an inverse relationship between the variables of price and quantity demanded. When
price goes up, quantity demanded goes down and vice versa.
● What does quantity demanded mean? (3 points)
Quantity demanded means the total amount of goods and services that people are willing to buy
at a certain price and time.
● How does the concept of ceteris paribus apply to the law of demand? (3 points)
The law of demand states that there is an inverse relationship between price and quantity
demanded. However, all variables must be held constant (ceteris paribus) in order for the law of
demand to work.
● Draw a hypothetical demand curve. Completely label your graph. (3 points)
● Explain in words how your drawing of a demand curve in part D demonstrates the law of
demand you stated in part A. (3 points)
The drawing demonstrates the law of demand because a decrease in price from P1 to P2
results in an increase in quantity demanded from Q1 to Q2.
2. Economists divide consumer responses to a change in price into two categories: the
income effect and the substitution effect. Explain each. (5 points)
The income effect describes how changes to consumers’ real income levels can affect their
purchasing patterns. The substitution effect is the decrease in sales for a product that can be
attributed to consumers switching to cheaper alternatives when its price rises.
3. To communicate clearly,economists distinguish between a change in demand and a
change in quantity demanded.
● What is the only thing that can cause a change in the quantity demanded for a good? (3
points)
Only the price of the particular good can cause a change in the quantity demanded for a good.
, ● Draw a hypothetical demand curve, and illustrate a decrease in quantity demanded on
your graph. (3 points)
● A change in demand is caused by a change in one of the ___________.
(3 points)
A change in demand is caused by a change in one of the determinants of demand.
● Draw a hypothetical demand curve, and illustrate a decrease in demand on your graph.
(3 points)
4. Does inflation cause a change in demand? Explain the role of inflation in determining
demand. (3 points)
Inflation does not affect demand. Because inflation causes prices and wages to increase,
people’s income and purchasing power stays the same and the demand does not change.
5. Consumer goods
● Goods are classified as normal goods and inferior goods. Explain and give an
example of each. (5 points)
Normal goods are goods that experience an increase in demand, due to an increase in
consumers' income. Examples of normal goods are food, clothing, and household necessities.
Inferior goods are goods whose demand drops when people's incomes rise. Examples of
inferior goods are store brand goods, cheaper meals like instant noodles, and used clothing.
