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Theory Of Demand And Supply

20 Questions
Theory Of Demand And Supply
Questions and Answers
  • 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.