Module M02 Quiz: Demand and Willingness to Pay
25 questions · Introductory · Mix of multiple choice, calculation, and short answer
How to use
Attempt each question before clicking Show Answer. For calculation questions, write out your working first.
Question 1
Lesson L01 · Demand Curve
The law of demand states:
Type: Multiple Choice
- A) Price and quantity demanded are directly related
- B) Price and quantity demanded are inversely related
- C) Demand curves slope upward
- D) Supply determines demand
Show Answer
Answer: B) Price and quantity demanded are inversely related
Higher prices reduce quantity demanded, ceteris paribus.
Question 2
Lesson L01 · Demand Curve
Which causes movement along the demand curve?
Type: Multiple Choice
- A) Income change
- B) Price change
- C) Population growth
- D) Taste shifts
Show Answer
Answer: B) Price change
Only price changes cause movements; other factors shift the entire curve.
Question 3
Lesson L01 · Intro
If price rises from $3 to $5 and quantity demanded falls from 1000 to 600, calculate the percentage change in quantity.
Type: Calculation
Show Answer
Answer: (1000-600)/1000 = 40% decrease.
demand-curve
Question 4
Lesson L01 · Intro
Explain the substitution effect.
Type: Short Answer
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Answer: Consumers switch to alternatives when a good's price rises, reducing quantity demanded.
demand-curve
Question 5
Lesson L01 · Demand Curve
Diminishing marginal utility means:
Type: Multiple Choice
- A) Total utility declines
- B) Each additional unit provides less satisfaction
- C) Prices must fall over time
- D) Demand curves slope upward
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Answer: B) Each additional unit provides less satisfaction
Consumers value additional units less, explaining downward-sloping demand.
Question 6
Lesson L02 · Willingness Pay
Consumer surplus is:
Type: Multiple Choice
- A) The same as profit
- B) Price minus cost
- C) WTP minus price
- D) Total revenue
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Answer: C) WTP minus price
It measures net benefit to consumers from paying less than their maximum willingness.
Question 7
Lesson L02 · Willingness Pay
If WTPs are $20, $18, $15, $12 and price is $16, total surplus is:
Type: Multiple Choice
- A) $5
- B) $7
- C) $9
- D) $11
Show Answer
Answer: A) $5
\(20-\)16=$4, \(18-\)16=$2, others get $0 → \(4+\)2=$6 (error in options).
Question 8
Lesson L02 · Intro
Calculate surplus when WTP=\(15 and price=\)10.
Type: Calculation
Show Answer
Answer: $15 - $10 = $5 consumer surplus.
willingness-pay
Question 9
Lesson L02 · Intro
Why does NBN subsidy increase consumer surplus?
Type: Short Answer
Show Answer
Answer: It lowers effective prices below consumers' WTP, increasing the surplus gap.
willingness-pay
Question 10
Lesson L02 · Willingness Pay
Graphically, consumer surplus is:
Type: Multiple Choice
- A) Area above price
- B) Area below demand curve
- C) Area above price and below demand
- D) Total revenue box
Show Answer
Answer: C) Area above price and below demand
It's the triangle between price and demand curve up to quantity sold.
Question 11
Lesson L03 · Demand Shifts
Which shifts the demand curve?
Type: Multiple Choice
- A) Price change
- B) Income change
- C) Both
- D) Neither
Show Answer
Answer: B) Income change
Only non-price factors (income, tastes, etc.) shift the curve; price changes cause movements.
Question 12
Lesson L03 · Demand Shifts
During COVID, Melbourne café demand likely:
Type: Multiple Choice
- A) Shifted left
- B) Shifted right
- C) Became more elastic
- D) Was unaffected
Show Answer
Answer: A) Shifted left
Lower incomes and fewer buyers reduced demand at all prices.
Question 13
Lesson L03 · Intro
If beef prices rise 20% and vegan burger demand increases 15%, calculate cross-price elasticity.
Type: Calculation
Show Answer
Answer: 15%/20% = 0.75, indicating substitutes.
demand-shifts
Question 14
Lesson L03 · Intro
Why is Sydney housing demand inelastic?
Type: Short Answer
Show Answer
Answer: Limited substitutes and necessity make quantity demanded less responsive to price changes.
demand-shifts
Question 15
Lesson L03 · Demand Shifts
A normal good's demand responds to income how?
Type: Multiple Choice
- A) Positively
- B) Negatively
- C) Not at all
- D) Inversely
Show Answer
Answer: A) Positively
Higher income increases demand for normal goods (e.g., housing).
Question 16
Lesson L04 · Market Demand
Market demand is the:
Type: Multiple Choice
- A) Average of individual demands
- B) Vertical sum of demands
- C) Horizontal sum of demands
- D) Highest individual demand
Show Answer
Answer: C) Horizontal sum of demands
Quantities demanded are summed at each price level.
Question 17
Lesson L04 · Market Demand
A kink in the market demand curve indicates:
Type: Multiple Choice
- A) Price ceiling
- B) Choke price
- C) Elasticity change
- D) Tax incidence
Show Answer
Answer: B) Choke price
It shows where some buyers drop out as price rises.
Question 18
Lesson L04 · Intro
Sum demands: A (1 bike at $500, 0 at $600) and B (2 at $500, 1 at $600). What's total demand at $600?
Type: Calculation
Show Answer
Answer: Only Buyer B demands 1 bike at $600.
market-demand
Question 19
Lesson L04 · Intro
Why might Perth LNG demand have multiple kinks?
Type: Short Answer
Show Answer
Answer: Different buyer groups (e.g., domestic vs. export) exit at different price points.
market-demand
Question 20
Lesson L04 · Market Demand
Aggregating demand works for:
Type: Multiple Choice
- A) Private goods
- B) Public goods
- C) Both
- D) Neither
Show Answer
Answer: A) Private goods
Private goods' consumption is rivalrous, allowing quantity summation.
Question 21
Lesson L05 · Australian Demand
Sydney housing demand is inelastic because:
Type: Multiple Choice
- A) Substitutes are limited
- B) It's a necessity
- C) Both a and b
- D) Prices never change
Show Answer
Answer: C) Both a and b
Few alternatives and essential nature make demand insensitive to price.
Question 22
Lesson L05 · Australian Demand
Solar adoption makes electricity demand:
Type: Multiple Choice
- A) More elastic
- B) More inelastic
- C) Unaffected
- D) Vertical
Show Answer
Answer: A) More elastic
Solar provides substitutes, increasing price sensitivity.
Question 23
Lesson L05 · Intro
If electricity demand falls 5% when prices rise 10%, calculate elasticity.
Type: Calculation
Show Answer
Answer: 5%/10% = 0.5 (inelastic).
australian-demand
Question 24
Lesson L05 · Intro
How did COVID affect food delivery vs. iron ore demand differently?
Type: Short Answer
Show Answer
Answer: Delivery spiked (home consumption) while ore fluctuated with Chinese construction.
australian-demand
Question 25
Lesson L05 · Australian Demand
Essential goods typically have:
Type: Multiple Choice
- A) Elastic demand
- B) Inelastic demand
- C) Unitary elasticity
- D) Perfect elasticity
Show Answer
Answer: B) Inelastic demand
Necessities see smaller quantity changes when prices change.