Question 1

A friend of yours who owns a flower-selling business has the following opinion about the law of demand: She does not think that the law of demand is valid for red roses, because during February, when the price of red roses was very high, she sold many more. It therefore seems that there is a positive relationship between the price of red roses and the quantity demanded of it.

Which one of the following is the best response to her argument?

a) You agree with her and indicate that based on the evidence for red roses, the law of demand does not apply. b) You agree with her and argue that the law of demand is only applicable to a few goods and services. c) You disagree with her by stating that her information must be incorrect. d) You disagree with her and explain that the cause of the increase in the quantity demanded might be the result of some other factor and not the increase in the price.

Question 2

Assume that you are at Total sports buying a pair of sneakers. While you are there, they announce that sneakers are now on sale at 30% less. Based on this, you decide to buy two pairs instead of one pair of sneakers. Is this a(an)

a) increase in demand that shifts the demand for sneakers to the right? b) increase in quantity demanded that is a downward movement along the demand curve for sneakers? c) decrease in demand that shifts the demand curve for sneakers to the left? d) decrease in quantity demanded that is an upward movement along the demand curve for sneakers?

Question 7 The following diagram illustrates the impact of an increase in demand. Which of the following statements is INCORRECT?

\fP S D 0 QeQuantity Demanded Price Quantity Supplied (millions of pounds (dollars per (millions of pounds per year) pound) per year) Case Case Case Case Case Case 2 3 A B C 15 10 12 HNWAG 12 10 15