Which of the following could cause an increase in the demand for peanut butter?

Law of demand is a fundamental principle of Economics, it states that quantity demanded is always inversely related to the price of the goods. In other words, with increase in price, quantity demanded will be less and vice versa.

Inhaltsverzeichnis Show

What is a Demand Curve?
Drawing a Demand Curve
Shifts in the Curve
Example of a Shift in the Demand Curve
Movements Along the Demand Curve
Other Resources
Which of the following would increase the demand for peanut butter?
Which of the following would cause an increase in demand?
Which of the following could cause a decrease in the demand for jelly?
What can cause the market equilibrium price of peanut butter to increase quizlet?

Following are some of the law of demand multiple choice questions and answers that will help the students in brushing up their understanding of the concept of law of demand.

Q1. The law of demand states, with increase in price there is

(a) decrease in quantity demanded

(b) increase in quantity demanded

(d) increased demand

Answer: a

Q2. The following would cause a change in the quantity demanded for a product?

(a) changing prices of related products

(b) changing consumer tastes

(d) decreasing price of product

Answer: d

Q.3 Increase in demand can occur due to:

(a) Increase in income of the consumer

(b) Decrease in price of the complementary good

(d) All of these

Answer: d

Q4. Violation of Law of Demand occurs when:

(a) Negative income effect is greater than substitution effect

(b) Negative income effect is less than substitution effect

(d) Substitution effect is negative

Answer: a

Q5. Movement along the demand curve illustrates

(a) shift in quantity demanded

(b) complement effect

(d) income effect

Answer: c

Q6. Increase in demand is shown by demand curve when

(a) the curve shifts right

(b) the curve shifts left

(d) movement along the curve

Answer: a

Q.7 The demand curve is always

(a) level

(b) irregular

(d) downward sloping

Answer: d

Q.8 Which of the following is a complement product to peanut butter?

(a) Sugar

(b) Jelly

(d) Soda

Answer: b

Q.9 The Law of Demand is measured from the perspective of

(a) Consumer

(b) Shopkeeper

(d) Manufacturer

Answer: a

Q.10 Goods for which demand goes down when income goes up are called

(a) Public Goods

(b) Inferior Goods

(d) Private Goods

Answer: b

To read more such MCQs on various topics pertaining to Commerce, visit here

A graphical representation of how many units of a good or service will be purchased at each possible price

What is a Demand Curve?

The demand curve is a line graph utilized in economics, that shows how many units of a good or service will be purchased at various prices. The price is plotted on the vertical (Y) axis while the quantity is plotted on the horizontal (X) axis.

Demand curves are used to determine the relationship between price and quantity, and follow the law of demand, which states that the quantity demanded will decrease as the price increases. In addition, demand curves are commonly combined with supply curves to determine the equilibrium price and equilibrium quantity of the market.

Drawing a Demand Curve

The demand curve is based on the demand schedule. The demand schedule shows exactly how many units of a good or service will be purchased at various price points.

For example, below is the demand schedule for high-quality organic bread:

It is important to note that as the price decreases, the quantity demanded increases. The relationship follows the law of demand. Intuitively, if the price for a good or service is lower, there is a higher demand for it.

From the demand schedule above, the graph can be created:

Through the demand curve, the relationship between price and quantity demanded is clearly illustrated. As the price for notebooks decreases, the demand for notebooks increases.

Shifts in the Curve

Shifts in the demand curve are strictly affected by consumer interest. Several factors can lead to a shift in the curve, for example:

1. Changes in income levels

If the good is a normal good, higher income levels lead to an outward shift of the demand curve while lower income levels lead to an inward shift. When income is increased, the demand for normal goods or services will increase.

2. Changes in the market’s size

A growing market results in an outward shift of the demand curve while a shrinking market results in an inward shift. A larger market size results from more consumers. Therefore, the demand (due to more consumers) will increase.

3. Changes in the price of related goods and services

When the price of complementary goods decreases, the demand curve will shift outwards. Alternatively, if the price of complementary goods increases, the curve will shift inwards. The opposite is true for substitute goods. For example, if the price for peanut butter goes down significantly, the demand for its complementary good – jelly – increases.

Example of a Shift in the Demand Curve

Recall the demand schedule for high-quality organic bread:

Assume that the price of a complementary good – peanut butter – decreases. How would this affect the demand curve for high-quality organic bread?

Since peanut butter is a complementary good to high-quality organic bread, a decrease in the price of peanut butter would increase the quantity demanded of high-quality organic bread. When consumers buy peanut butter, organic bread is also bought (hence, complementary). If the price of peanut butter decreases, then more consumers purchase peanut butter. Therefore, consumers would also purchase more high-quality organic bread as it is a complement to peanut butter.

We can see from the chart above that a decrease in the price of a complementary good would increase the quantity demanded of high-quality organic bread.

Movements Along the Demand Curve

Changes in price cause movements along the demand curve. Following the original demand schedule for high-quality organic bread, assume the price is set at P = $6. At this price, the quantity demanded would be 2000.

If the price were to change from P = $6 to P = $4, it would cause a movement along the demand curve, as the new quantity demanded would be 3000.

Other Resources

CFI is a leading provider of financial certifications and analyst training. To continue learning and advancing your career, these additional CFI resources will be helpful:

Free Economics for Capital Markets Course
Law of Supply
Invisible Hand
Economies of Scale
Consumer Surplus Formula
See all economics resources

Which of the following would increase the demand for peanut butter?

Answer and Explanation: b. News that insects have destroyed much of the peanut crop and that there will be less peanut butter on the shelves in three months will lead to an increase in demand as people will keep peanut butter for the future. This will shift the demand curve in the rightward direction.

Which of the following would cause an increase in demand?

The demand for a normal good increases if income increases. The demand for an inferior good decreases if income increases. Expected future income and expected future prices influence demand today. For example, if the price of a computer is expected to fall next month, the demand for computers today decreases.

Which of the following could cause a decrease in the demand for jelly?

EXPLANATION:For jelly, demand will decrease when jelly news is bad (because of a change in tastes and preferences) or when the price of peanut butter, a complementary good, rises.

What can cause the market equilibrium price of peanut butter to increase quizlet?

Explanation: An increase in demand causes equilibrium price and equilibrium quantity to increase. A decrease in supply causes equilibrium price to increase and equilibrium quantity to decrease.