demo_libsvm_test1 is not in any Mathworks-supplied code, and does not appear to be in the File Exchange either. It appears to be in sources source as https://sites.google.com/site/kittipat/libsvm_matlab that expect you to have installed the software (including data files) from that source.
Note that the svm supported as part of the Statistics and Machine Learning Toolbox is not the same as libsvm -- the Mathworks version is probably based upon libsvm but has a different interface including at least one routine with the same name but different calling sequence. dem_libsvm_test1 is not intended for use with the Mathworks svm routines.
