# Theory Of Demand And Supply

20 Questions
• 1.
Demand for a commodity refers to :
• A.

Desire for the commodity.

• B.

Need for the commodity.

• C.

Quantity demanded of that commodity.

• D.

Quantity of the commodity demanded at a certain price during any particular period of time.

• 2.
Contraction of demand is the result of :
• A.

Decrease in the number of consumers.

• B.

Increase in the price of the good concerned.

• C.

Increase in the prices of other goods.

• D.

Decrease in the income of purchasers

• 3.
All but one of the following are assumed to remain the same while drawing an individual's demand curve for a commodity. Which one is it?
• A.

The preference of the individual.

• B.

His monetary income.

• C.

Price.

• D.

Price of related goods.

• 4.
Which of the following pairs of goods is an example of substitutes?
• A.

Tea and sugar.

• B.

Tea and coffee.

• C.

Pen and ink.

• D.

Shirt and trousers.

• 5.
In the case of a straight line demand curve meeting the two axes, the price-elasticity of demand at the mid-point of the line would be :
• A.

0

• B.

1

• C.

1.5

• D.

2

• 6.
The Law of Demand, assuming other things to remain constant, establishes the relationship between :
• A.

Income of the consumer and the quantity of a good demanded by him.

• B.

Price of a good and the quantity demanded.

• C.

Price of a good and the demand for its substitute.

• D.

Quantity demanded of a good and the relative prices of its complementary goods.

• 7.
Identify the factor which generally keeps the price-elasticity of demand for a good low :
• A.

Variety of uses for that good.

• B.

Its low price.

• C.

Close substitutes for that good.

• D.

High proportion of the consumer's income spent on it.

• 8.
Identify the coefficient of price-elasticity of demand when the percentage increase in the quantity of a good demanded is smaller than the percentage fall in its price :
• A.

Equal to one.

• B.

Greater than one.

• C.

Smaller than one.

• D.

Zero.

• 9.
In the case of an inferior good, income elasticity oi demand is :
• A.

Positive.

• B.

Zero.

• C.

Negative.

• D.

Infinite.

• 10.
If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to :
• A.

Remain the same.

• B.

Increase.

• C.

Decrease.

• D.

Any of these.

• 11.
If regardless of changes in its price, the quantity demanded of a good remains unchanged, then the demand curve for the good will be :
• A.

Horizontal.

• B.

Vertical.

• C.

Positively sloped.

• D.

Negatively sloped.

• 12.
The law of demand is :
• A.

A quantitative statement.

• B.

A qualitative statement.

• C.

Both a quantitative and a qualitative statement.

• D.

Neither a quantitative nor a qualitative statement.

• 13.
All of the following are determinants of demand except:
• A.

Tastes and preferences.

• B.

Quantity supplied.

• C.

Income.

• D.

Price of related goods.

• 14.
A movement along the demand curve for soft drinks is best described as :
• A.

An increase in demand.

• B.

A decrease in demand.

• C.

A change in quantity demanded.

• D.

A change in demand.

• 15.
If the price of Pepsi decreases relative to the price of Coke and 7-UP, the demand for :
• A.

Coke will decrease.

• B.

7-Up will decrease.

• C.

Coke and 7-UP will increase.

• D.

Coke and 7-Up will decrease.

• 16.
If a good is a luxury, its income elasticity of demand is :
• A.

Positive and less than 1.

• B.

Negative but greater than -1.

• C.

Positive and greater than 1.

• D.

Zero.

• 17.
The price of hot dogs increases by 22% and the quantity of hot dogs demanded falls by 25%. This indicates that demand for hot dogs is :
• A.

Elastic.

• B.

Inelastic.

• C.

Unitarily elastic.

• D.

Perfectly elastic.

• 18.
If the quantity demanded of beef increases by 5% when the price of chicken increases by 20%, the cross-price elasticity of demand between beef and chicken is
• A.

-0.25

• B.

0.25

• C.

-4

• D.

4

• 19.
Given the following four possibilities, which one results in an increase in total consumer expenditures?
• A.

Demand is unitary elastic and price falls.

• B.

Demand is elastic and price rises.

• C.

Demand is inelastic and price falls.

• D.

Demand is inelastic and prices rises.

• 20.
The price elasticity of demand for hamburger is
• A.

The change in the quantity demanded of hamburger when hamburger increases by 30 paise per rupee.

• B.

The percentage increase in the quantity demanded of hamburger when the price of hamburger falls by 1 per cent per rupee.

• C.

The increase in the demand for hamburger when the price of hamburger falls by 10 per cent per rupee.

• D.

The decrease in the quantity demanded of hamburger when the price of hamburger falls by 1 per cent per rupee.

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