Demand: the demand curve and what shifts it

Grade 12 Social Studies Worksheet - Challenge Me

Circle the best answer.

1. Read this first

   Use this

   Cards A to C on reading demand from data (card A is real data; card B is exact; card C is a summary in our words). Card A, "U.S. diesel, 2007 to 2010". Who made it: the U.S. Energy Information Administration (diesel and crude oil, annual averages) and the Federal Reserve through FRED (industrial production, annual average, 2017 = 100), read November 14, 2026. Table, columns Year | Retail diesel, dollars a gallon | Distillate fuel used, thousand barrels a day | Brent crude oil, dollars a barrel | Industrial production index: 2007 | 2.885 | 4,196 | 72.44 | 101.6; 2008 | 3.803 | 3,945 | 96.94 | 98.1; 2009 | 2.467 | 3,631 | 61.74 | 86.9; 2010 | 2.992 | 3,800 | 79.61 | 91.7. Note in our words: distillate fuel used is product supplied, mostly diesel and heating oil; industrial production measures the output of factories, mines and utilities, a driver of freight demand; prices are not adjusted for inflation. Card B, "Alfred Marshall, Principles of Economics (1890), Book III, Chapter III". Excerpt 1: "There is then one general law of demand:—The greater the amount to be sold, the smaller must be the price at which it is offered in order that it may find purchasers; or, in other words, the amount demanded increases with a fall in price, and diminishes with a rise in price." Excerpt 2: "The demand prices in our list are those at which various quantities of a thing can be sold in a market during a given time and under given conditions. If the conditions vary in any respect the prices will probably require to be changed;" Card C, "E. J. Working, 'What Do Statistical "Demand Curves" Show?' (Quarterly Journal of Economics, 1927)". Summary in our words, not a quotation: Each year's price and quantity is where that year's supply and demand cross. If demand stays put while supply shifts, the points trace the demand curve. If demand shifts while supply stays put, they trace supply. If both shift, a line through the points may be neither curve, unless the shifts are measured and allowed for.

2. 1.

   Ari wants to estimate diesel's demand curve from rows like card A's. Following card C, which added data would help most?

   • Years when freight demand moved but crude costs held steady, so that the points trace demand
   • Monthly prices instead of yearly ones, so that each shift of demand shows up as it happens
   • More years of price and use, so that a longer series averages out the shifts in both curves
   • Years when crude costs moved but freight demand held steady, so that only supply shifted

3. Use this

   Cards A to C on tea in Harwick (example figures, made up for practice). Card A, "The tea market". Demand: Q = 1,200 − 100P. Supply: Q = 200P − 300. P is dollars a box and Q is boxes a week; the market clears at $5 and 700 boxes. Card B, "A proposed tax". Sellers would send the town $1.50 for every box sold. Card C, "Two changes next season". A frost raises coffee prices 30 percent; the cross-price elasticity of tea demand with the price of coffee is +0.5, so buyers want 105 more boxes a week at every price, about 15 percent of today's sales. Separately, a new tea-drying machine lets sellers offer 150 more boxes a week at every price.

4. 2.

   Milo applies both changes on card C to card A's tea market. Which prediction for next season is best?

   • Sales rise by 255 boxes, to 955 a week, while the price stays at $5 as the two shifts offset
   • Sales rise for sure; the price dips, since at $5 the 150 new boxes offered exceed the 105 wanted
   • The price rises, since dearer coffee sends buyers to tea and pushes the tea price up
   • Both the price and the boxes sold stay uncertain until next season, since two shifts leave both results open
5. 3.

   A tea seller says card B's $1.50 tax falls on sellers, since sellers send it in. Pia tests the claim with cards A and B. What is the best verdict?

   • Mostly wrong: buyers' price rises $1 to $6 and sellers keep $4.50, so buyers bear two thirds
   • Partly right: the price rises 50 cents to $5.50, so sellers bear two thirds of the tax
   • Mostly wrong: buyers bear the full tax, since sellers simply add the whole $1.50 to the price
   • Right: sellers hand over $1.50 on each box, so the whole tax comes out of what they earn
6. 4.

   The town says card B's tax raises $900 a week at no cost beyond the tax itself. Esme weighs the claim with card A. Which judgment fits best?

   • Right: the $900 the town collects is what buyers and sellers lose, so nothing else is lost
   • Wrong: 100 boxes worth more than they cost go unsold, a loss of $75 beyond the $900
   • Wrong: the tax raises $1,050, since each of the 700 boxes sold today would pay $1.50
   • Wrong: the loss beyond the tax is $150, the $1.50 tax times the 100 boxes no longer sold

7. Use this

   Cards A to C on reading demand from data (card A is real data; card B is exact; card C is a summary in our words). Card A, "U.S. diesel, 2007 to 2010". Who made it: the U.S. Energy Information Administration (diesel and crude oil, annual averages) and the Federal Reserve through FRED (industrial production, annual average, 2017 = 100), read November 14, 2026. Table, columns Year | Retail diesel, dollars a gallon | Distillate fuel used, thousand barrels a day | Brent crude oil, dollars a barrel | Industrial production index: 2007 | 2.885 | 4,196 | 72.44 | 101.6; 2008 | 3.803 | 3,945 | 96.94 | 98.1; 2009 | 2.467 | 3,631 | 61.74 | 86.9; 2010 | 2.992 | 3,800 | 79.61 | 91.7. Note in our words: distillate fuel used is product supplied, mostly diesel and heating oil; industrial production measures the output of factories, mines and utilities, a driver of freight demand; prices are not adjusted for inflation. Card B, "Alfred Marshall, Principles of Economics (1890), Book III, Chapter III". Excerpt 1: "There is then one general law of demand:—The greater the amount to be sold, the smaller must be the price at which it is offered in order that it may find purchasers; or, in other words, the amount demanded increases with a fall in price, and diminishes with a rise in price." Excerpt 2: "The demand prices in our list are those at which various quantities of a thing can be sold in a market during a given time and under given conditions. If the conditions vary in any respect the prices will probably require to be changed;" Card C, "E. J. Working, 'What Do Statistical "Demand Curves" Show?' (Quarterly Journal of Economics, 1927)". Summary in our words, not a quotation: Each year's price and quantity is where that year's supply and demand cross. If demand stays put while supply shifts, the points trace the demand curve. If demand shifts while supply stays put, they trace supply. If both shift, a line through the points may be neither curve, unless the shifts are measured and allowed for.

8. 5.

   Bo wants the pair of years on card A that comes closest to card C's case where only supply shifts. Which pair is it, and why?

   • 2008 to 2009: the price fell most, 35 percent, so that pair shows buyers' response most clearly
   • 2009 to 2010: crude rose 29 percent and use rose 5 percent, so the points follow demand
   • Any pair works, since crude moved by about a third each time, so supply shifted in each pair
   • 2007 to 2008: crude rose 34 percent while industrial output moved least, down about 3 percent
9. 6.

   From 2007 to 2008, Kira combines card A with what crude and output say about each curve. Which account fits the evidence best?

   • Both curves shifted left, so use had to fall; the price rose, so the supply shift was larger
   • Both curves shifted left, so neither the change in price nor in use could have been predicted
   • Supply shifted left alone, so the year traces diesel's demand curve, an elasticity near −0.19
   • Demand rose and supply fell, and the rise in demand outweighed it, so price and use both rose

10. Use this

    Cards A to C on tea in Harwick (example figures, made up for practice). Card A, "The tea market". Demand: Q = 1,200 − 100P. Supply: Q = 200P − 300. P is dollars a box and Q is boxes a week; the market clears at $5 and 700 boxes. Card B, "A proposed tax". Sellers would send the town $1.50 for every box sold. Card C, "Two changes next season". A frost raises coffee prices 30 percent; the cross-price elasticity of tea demand with the price of coffee is +0.5, so buyers want 105 more boxes a week at every price, about 15 percent of today's sales. Separately, a new tea-drying machine lets sellers offer 150 more boxes a week at every price.

11. 7.

    A blogger says buyers bear most of card B's tax because tea demand is inelastic. Luz checks the reasoning against card A at $5. What is the best verdict?

    • Wrong: buyers respond more to price than sellers do, so sellers bear most of the tax
    • Wrong: demand at $5 is elastic, about −1.4, so sellers bear most of the tax on tea
    • Right: inelastic demand alone decides it, so buyers would bear most of any tax placed on tea in Harwick
    • Incomplete: buyers bear more because at $5 supply responds twice as strongly to price as demand
12. 8.

    A café owner reads card C and says tea and coffee must be complements, since dearer coffee raises the demand for tea. Noah tests the claim. Which verdict is best?

    • Right: when demand for one good rises with another's price, card C's plus sign marks complements
    • Wrong: a positive cross-price elasticity marks substitutes, so buyers switch from dearer coffee to tea
    • Right: the coffee price rise moves tea buyers along the tea demand curve toward more boxes
    • Wrong: tea and coffee are unrelated goods, since the frost hit the coffee harvest, not tea

13. Use this

    Cards A to C on reading demand from data (card A is real data; card B is exact; card C is a summary in our words). Card A, "U.S. diesel, 2007 to 2010". Who made it: the U.S. Energy Information Administration (diesel and crude oil, annual averages) and the Federal Reserve through FRED (industrial production, annual average, 2017 = 100), read November 14, 2026. Table, columns Year | Retail diesel, dollars a gallon | Distillate fuel used, thousand barrels a day | Brent crude oil, dollars a barrel | Industrial production index: 2007 | 2.885 | 4,196 | 72.44 | 101.6; 2008 | 3.803 | 3,945 | 96.94 | 98.1; 2009 | 2.467 | 3,631 | 61.74 | 86.9; 2010 | 2.992 | 3,800 | 79.61 | 91.7. Note in our words: distillate fuel used is product supplied, mostly diesel and heating oil; industrial production measures the output of factories, mines and utilities, a driver of freight demand; prices are not adjusted for inflation. Card B, "Alfred Marshall, Principles of Economics (1890), Book III, Chapter III". Excerpt 1: "There is then one general law of demand:—The greater the amount to be sold, the smaller must be the price at which it is offered in order that it may find purchasers; or, in other words, the amount demanded increases with a fall in price, and diminishes with a rise in price." Excerpt 2: "The demand prices in our list are those at which various quantities of a thing can be sold in a market during a given time and under given conditions. If the conditions vary in any respect the prices will probably require to be changed;" Card C, "E. J. Working, 'What Do Statistical "Demand Curves" Show?' (Quarterly Journal of Economics, 1927)". Summary in our words, not a quotation: Each year's price and quantity is where that year's supply and demand cross. If demand stays put while supply shifts, the points trace the demand curve. If demand shifts while supply stays put, they trace supply. If both shift, a line through the points may be neither curve, unless the shifts are measured and allowed for.

14. 9.

    Tala combines cards B and C to judge what card A's four rows can show. Which conclusion do the three cards best support?

    • The rows show Marshall's law fails for fuel, since use rose with price in 2010 and fell with it in 2009
    • The rows mix shifts of both curves, so a line through them need not be Marshall's demand list
    • The rows trace demand once 2009, the recession year, is dropped, since conditions held in the others
    • The rows trace diesel's supply curve, since price and use rose and fell together in most years
15. 10.

    An analyst argues that cheaper diesel does not raise use, citing 2009 on card A. Zee looks for the strongest objection the cards allow. Which is it?

    • The law of demand holds by definition, so no data from any year on the card could ever count against it
    • Use rose 4.7 percent in 2010 as output recovered, which shows cheaper diesel does raise use
    • Output fell 11 percent in 2009, so demand shifted left; card B's law holds conditions fixed
    • Crude fell 36 percent in 2009, so the analyst should credit cheaper oil for the lower price