9.

If Individual Demand = Market Demand =

1. Purchasing power of money fall when Firm’s Demand, it means that —
(a) Price level increases (a) There is only one Producer
(b) Price level decreases (b) There is only one Consumer
(c) Income level increases (c) Both (a) and (b)
(d) Money supply falls (d) Neither (a) nor (b)
2. Unless Demand is backed by 10. Which of the following influence most the
purchasing power or ability to pay, it price level in the very short—run period?
does not constitute Demand. This (a) Demand
statement is — (b) Supply
(a) True (c) Cost
(b) False (d) Production
(c) Partially True 11. Suppose the price of Pepsi increases, we will
(d) Nothing can be said expect the demand curve of Coca Cola to:
(a) shift towards left since these are substitutes.
3. In the context of Effective Demand, (b) shift towards right since these are
Willingness to spend means — substitutes.
(a) Availability of Money with Consumers (c) remain at the same level.
(b) Readiness to use available money for (d) None of the above.
purchasing a Commodity
(c) Both (a) and (b) 12. All of the following are determinants of
(d) Neither (a) nor (b) demand except:
(a) tastes and preferences.
4. For Demand to be effective, the Commodity (b) quantity supplied.
should be available — (c) income of the consumer.
(a) At a certain price (d) price of related goods.
(b) At a certain place
(c) At a certain time 13. If the price of Pepsi decreases relative to the
(d) All of the above price of Coke and 7-UP, the demand for :
(a) Coke will decrease.
5. Demand arises in respect of — (b) 7-Up will decrease.
(a) Socially desirable goods, e.g. food, clothing (c) Coke and 7-UP will increase.
(b) Harmful goods, e.g. liquor, cigarettes, etc. (d) Coke and 7-Up will decrease.
(c) Both (a) and (b)
(d) Neither (a) nor (b) 14. What will happen in the rice market if
buyers are expecting higher rice prices
6. Demand arises in respect of — in the near future?
(a) Capital Goods only (a) The demand for rice will increase.
(b) Consumer Goods only (b) The demand for rice will decrease.
(c) Both (a) and (b) (c) The demand for rice will be unaffected.
(d) Neither (a) nor (b) (d) None of the above.
7. The total demand for the product of an
individual Firm at various prices is known as 15. If, as people’s income increases, the
— quantity demanded of a good
(a) Industrial Demand decreases, the good is called
(b) Market Demand (a) a substitute.
(c) Household Demand (b) a normal good.
(d) Firm Demand (c) an inferior good.
(d) a complement.
8. If Market Demand and Firm’s Demand are
equal in a situation, it means that — 16. The Law of Demand is given by ___________
(a) There is only one Producer (a) Alfred Marshall
(b) There is only one Consumer (b) Paul Samuelson
(c) Both (a) and (b) (c) Robbins
(d) Neither (a) nor (b) (d) J B Say
17. What is an Engels of curve? 24. The operations of diminishing
(a) Another name of demand curve marginal utility & the act of the
(b) Curve showing both demand & supply consumer to equalize the utility
curves of the commodity with its price
(c) Curve named after Lord Engles result in a
(d) All demand curve.
(a) Downward sloping
18. Law of Demand is (b) Upward sloping
(a) Quantitative Statement (c) Straight line
(b) Qualitative Statement (d) Hyperbola upward
(c) Both a & b
(d) Hypothetical 25. As a result of fall in price of a
commodity, consumer real income
19. What is Engel’s Curve? or purchasing power increases. This
(a) Curve showing three demand curve increase in the real income induces
(b) Named after Ernst Engel him to buy more of that commodity.
(c) Both (a) and (b) This is technically termed as -
(d) None (a) Price effect
(b) Substitution effect
20. All but one of the following are (c) Income effect
assumed to remain the same while (d) Both b & c
drawing an individual’s demand
curve for a commodity. Which one 26. Which one of the following is not the
is it? rationale of Law of Demand?
(a) The preference of the individual. (a) Law of Diminishing Marginal utility
(b) His monetary income. (b) Price effect
(c) Price of the commodity. (c) Arrival of new customers
(d) Price of related goods. (d) Change of taste & preferences
21. Which of these is a variable factor in 27. In the case of a Giffen good, the
the Law of Demand? demand curve will be:
(a) Consumers’ Income Level (a) horizontal.
(b) Economic Conditions of Boom I (b) downward-sloping to the right.
Recession (c) vertical.
(c) Quality of the Product (d) upward-sloping to the right.
(d) Price of the Product
28. Conspicuous goods are also known as:
22. Why does the Law of Demand operate? (a) prestige goods.
(a) Income Effect (b) snob goods.
(b) Substitution Effect (c) Veblen goods.
(c) Both (a) and (b) (d) all of the above.
(d) Neither (a) nor (b)
29. With an increase in the price of
23. The total effect of a price change of a diamond, the quantity
commodity is demanded also increases. This
(a) Substitution Effect + Price Effect is because it is
(b) Substitution Effect + Income Effect (a) substitute good.
(c) Substitution Effect + Demonstration (b) complementary good.
Effect (c) conspicuous good.
(d) Substitution Effect minus Income Effect (d) none of the above.
30. An example of a good that exhibit
direct price-demand relationship is 36. If there is increase in Price from
(a) Giffen goods. Rs.4 to Rs.6 then decrease in
(b) Complementary goods. demand from 15 units to 10 units.
(c) Substitute goods. What is the price elasticity? (Point
(d) None of the above. elasticity)
31. Which factor generally keeps the price- (a) 0.66
elasticity of demand for a good low: (b) 5
(a) Variety of uses for that good (c) 1.5
(b) Its low price (d) 2
(c) Close substitutes for that good
(d) High proportion of the consumer’s 37. Suppose the price of movies seen at a
income spent on it. theatre rises from Rs.120 per person
to Rs.200 per person. The theatre
32. In case of straight line demand manager observed that the rise in
curve meeting the two axes, the prices has lead to a fall in attendance
price elasticity of demand at the at a given movies from 300 persons to
mid-point of the line would be: 200 persons. What is the price
(a) 0 elasticity to demand for the movie?
(b) 1 (Arc Elasticity)
(c) 1.5 (a) 0.5
(d) 2 (b) 0.8
(c) 1.00
33. For a commodity with a unitary (d) None of these
elastic demand curve if the price 40. If the local pizzeria raises the price
of the commodity rises, then the of a medium pizza fromRs.60
consumer’s total expenditure on toRs.100 and quantity demanded
this commodity would: falls from 700 pizzas a night to 100
(a) Increase pizzas a night, the price elasticity of
(b) Decrease demand for pizzas is: (Use Arc
(c) Remains constants Elasticity Method)
(d) Either increase or decrease (a) .67
(b) 1.5
34. What is the value of elasticity of (c) 2.0
demand if the demand for the good is (d) 3.0
perfectly elastic?
(a) 0 41. If electricity demand is inelastic,
(b) 1 and electricity charges increase,
(c) Infinity which of the following is likely to
(d) Less than 0 occur?
(a) Quantity demanded will fall by a
35. What is the original price of a relatively large amount.
commodity when price elasticity is (b) Quantity demanded will fall by a
0.71 and demand changes from 20 relatively small amount.
units to 15 units and the new price (c) Quantity demanded will rise in the
is Rs 10? (Point Elasticity) short run, but fall in the long run.
(a) Rs 15.4 (d) Quantity demanded will fall in the
(b) Rs.18 short run, but rise in the long run.
(c) Rs.20
(d) Rs.8
42. Suppose the demand for (d) the consumer is operating along a
meals at a medium-priced linear demand curve at a point at
restaurant is elastic. If the which the price is very high and
management of the the quantity demanded is very
restaurant is considering low.
raising prices, it can expect a
relatively: 46. Demand for a good will tend
(a) large fall in quantity demanded. to be more elastic if it exhibits
(b) large fall in demand. which of the following
(c) small fall in quantity demanded. characteristics?
(d) small fall in demand. (a) It represents a small part of the
consumer’s income.
43. Point elasticity is useful for (b) The good has many substitutes
which of the following available.
situations? (c) It is a necessity (as opposed to a
(a) The bookstore is considering doubling luxury).
the price of notebooks. (d) There is little time for the consumer to
(b) A restaurant is considering lowering adjust to the price change
the price of its most expensive dishes 47. Compute income elasticity if demand
by 50 percent. increases by 5% and income by 1%
(c) An auto producer is interested in (a) 5
determining the response of (b) 1/5
consumers to the price of cars being (c) 0
lowered byRs.100. (d) None
(d) None of the above.
48. What is income elasticity of demand,
44. A decrease in price will result in an when income changes by 20% and
increase in total revenue if : demand changes by 40%
(a) the percentage change in quantity (a) ½
demanded in less than the percentage (b) 2
change in price. (c) 0.33
(b) the percentage change in quantity (d) None
demanded is greater than the
percentage change in price. 49. If income of person increases
(c) demand is inelastic. by 10% and his demand for
(d) the consumer is operating along a goods increases by 30%
linear demand curve at a point at income elasticity will be _______
which the price is very low and (a) Equal to one.
the quantity demanded is very (b) Less than one
high. (c) More than one
(d) None of these
45. An increase in price will result in an
increase in total revenue if : 50. Calculate income elasticity for the
(a) the percentage change in quantity household when the income of the
demanded is less than the percentage household increase by 10% and the
change in price. demand for cars rises by 20%
(b) the percentage change in quantity (a) +2.
demanded is greater than the (b) -2.
percentage change in price. (c) +5.
(c) demand is elastic. (d) -5.
51. Demand of i-pod increase from 57. Cross elasticity of complementary
Rs.950 to Rs.980 and income goods is:
increase from Rs.9,000 to (a) Positive
Rs.9,800. what is income (b) Negative
elasticity? (c) Infinity
(a) 0.53 (d) None of these
(b) 0.35 58. If Marginal Utility of a product remains
(c) 0.43 constant, the Demand Curve will be —
(d) None (a) Convex
52. If a good is a luxury, its income (b) Concave
elasticity of demand is: (c) Straight line
(a) positive and less than 1. (d) None of the above
(b) negative but greater than -1.
(c) positive and greater than 1. 59. The concept of Elasticity of Demand
(d) zero. was developed by —
(a) Alfred Marshall
53. Suppose a consumer’s income (b) Edwin Cannon
increases fromRs.30,000 (c) Paul Samuelson
toRs.36,000. As a result, the (d) Fredric Bonham
consumer increases her purchases of
compact discs (CDs) from 25 CDs to
30 CDs. What is the consumer’s 60. Two important factors which make
income elasticity of demand for CDs? difference in the Elasticity of Demand
(Use Arc Elasticity Method) for different commodities are
(a) 0.5 (a) Preferences and Income
(b) 1.0 (b) Income and Expenditure
(c) 1.5 (c) Quantity and Price of the Commodity
(d) 2.0 (d) Tax Rates and Level of Income
54. Cross elasticity of demand in Monopoly 61. When supply price increase in the short
market is: run, the profit of the producer
(a) Elastic :
(b) Zero (a) Increases
(c) Infinite (b) Decreases
(d) One (c) Remains constant
(d) Decreases marginally
55. In case of substitute goods, cross
elasticity is ________ 62. A change in the supply of a commodity
(a) Negative along with same supply curve may occur
(b) Zero due to:
(c) Positive (a) Change in the price of the commodity
(d) None of these (b) Change in the price of related goods
(c) Change in the future, expectations about
56. Cross elasticity of perfect substitutes the price of the good
is: (d) Change in the cost of inputs
(a) Zero
(b) Negative 63. In the book market, the supply of books
(c) One will decrease if any of the following
(d) Infinity occurs except
(a) a decrease in the number of book other than its own price
publishers. (c) Both of above
(b) a decrease in the price of the book. (d) None of above
(c) an increase in the future expected price of 70. Inventions and Innovations lead to —
the book. (a) Increase in supply quantity of new
(d) an increase in the price of paper used. products
(b) Reduction in the supply quantity of
64. An increase in the number of sellers of products that are displaced
bikes will increase the (c) Both (a) and (b)
(a) the price of a bike. (d) Neither (a) nor (b)
(b) demand for bikes.
(c) the supply of bikes. 71. Other things being equal, the supply
(d) demand for helmets. quantity of a product is
related to price of related goods.
65. Which of the following is the determinant (a) Directly (b) Inversely (c) Proportionally
in the Law of Supply? (d) Not at all
(a) Technology
(b) Price of related goods 72. Other things being equal, the supply
(c) Price of the product quantity of a product is
(d) None of these related to the Cost of Production
of that product.
66. Increase or decrease in supply means (a) Directly
(a) Shift in Supply curve (b) Inversely
(b) Movement along same supply (c) Proportionally
(c) Both (a) and (b) (d) Not at all
(d) Neither (a) or (b)
73. Generally, if there is an increase in
67. Expansion in supply refers to a situation Commodity Taxes (Excise Duty,
when the producers are willing to supply Customs Duty, VAT, etc.) leading to
a: increase in their cost of production,
(a) Larger quantity of the commodity at an the supply quantity will —
increased price (a) Increase
(b) Larger quantity of the commodity due to (b) Decrease
increased taxation on that commodity (c) Remain Constant
(c) Larger quantity of the commodity at the (d) Become Zero
same price 74. In case of failure of rains, floods, fires,
(d) Larger quantity of the commodity at the etc. the supply of agricultural
decreased price commodities will —
(a) Increase
68. If there is an improvement in technology (b) Decrease
: (c) Remain Constant
(a) The supply curve shift to the left (d) Become Zero
(b) The supply curve shift to the right
(c) Quantity supplied increase 75. In case of better rainfall,
(d) Both (b) and (c) improvement in irrigation,
improved seeds, etc. the supply of
69. Increase or decrease in supply means: agricultural commodities will —
(a) Change in supply due to change in its own (a) Increase
price (b) Decrease
(b) Change in supply due to change in factors (c) Remain Constant
(d) Become Zero of supply is
(a) less than one.
76. Movement from one supply curve (b) greater than one.
to another will be caused due to (c) one.
(a) Contraction of supply (d) none of the above
(b) expansion of supply
(c) decrease in supply 82. The supply function is given as Q=
(d) all of the above -100 + 10P. Find the elasticity
using point method, when price is
77. While recognizing increase or 15.
decrease in the quantity supplied, (a) 4
we assume remains (b) -3
constant. (c) -5
(a) Price (d) 3
(b) All factors other than price 83. At a price of Rs.25 per kg. the
(c) Both (a) and (b) supply of a commodity is 10,000
(d) Neither (a) nor (b) kg per week. An increase in its
78. What is the elasticity of supply price to Rs.30 per kg, increases the
when price changes from Rs.15 to supply of the commodity to 12,000
Rs.12 and supply change from 6 kg per elasticity of supply will be:-
units to 5 units? (a) 0.75.
(a) 0.77
(b) 1.00
(b) 0.87
(c) 1.50
(c) 0.833
(d) 1.75
(d) 0.58
84. Elasticity of supply is greater than
79. A perfectly inelastic supply curve one when:
will be (a) Proportionate change in –price is more
(a) Parallel to X axis than the proportionate change in quantity
(b) Parallel of Y axis supplied
(c) Download sloping (b) Proportionate change in quantity
(d) None of these supplied is more than the proportionate
80. Elasticity of supply is greater than change in price
one when (c) Change in price and quantify - supplied,
(a) proportionate change in quantity are equal .. -.
supplied is more than the proportionate (d) All of the above
change in price.
(b) proportionate change in price is greater 85. When the price of the commodity
than the proportionate change in quantity increases from Rs. 200 per unit to
supplied. Rs.250 per unit and consequently
(c) change in price and quantity supplied are the quantity supplied rises from
equal. 1000 units to 1100 units. What will
(d) None of the above. be the coefficient of elasticity of
supply?
81. If the change in quantity supplied (a) 4.0
is exactly equal to the relative
change in price then the elasticity (b) 0.4
(c) 5.0 (d) increases and the price rises.
(d) 0.5 91. If the demand is more than supply,
then the pressure on price will
86. Which of the following has the move it
lowest Price Elasticity of Supply? (a) upward
(a) Luxury Items (b) downward
(b) Necessities (c) constant
(c) Perishable Goods (d) none of the above
(d) Items that have the least budgetary
allocation 92. If equilibrium is present in a
market then it can be said that
87. In which of the following type of (a) The price’ of the product will tend to rise
product, is the Elasticity of Supply (b) Quantity demanded equals quantity
lowest? supplied
(a) Necessities (c) Quantity demanded exceeds quantity
(b) Luxury Goods supplied
(c) Perishable Goods (d) Quantity supplied exceeds quantity
(d) Perfect Substitutes demanded.
88. If the supply of bottled water
decreases, other things remaining 93. Increase in supply denotes shift in
the same, the equilibrium price the supply curve to the right. If
—— and the equilibrium quantity there is an increase in supply
———— without change in demand,
(a) increases; decreases. equilibrium price will and the
(b) decreases; increases. quantity demanded will go up.
(c) decreases; decreases. (a) fall
(d) increases; increases. (b) remain constant
(c) Increase
89. A decrease in the demand for (d) become zero
cameras, other things remaining 94. If decrease in demand is less than
the same will. the decrease in supply, then —
(a) increase the number of cameras bought. (a) Equilibrium Price and Quantity both
(b) decrease the price but increase the increase.
number of cameras bought. (b) Equilibrium Price and Quantity both
(c) increase the price of cameras. decrease.
(d) decrease the price and decrease in the (c) Equilibrium Price increases and Quantity
number of cameras bought. decreases.
(d) Equilibrium Price decreases and Quantity
90. If good growing conditions increases.
increases the supply of
strawberries and hot weather 95. Which of the following situation
increases the demand for does not lead to an increase in
strawberries, the quantity of Equilibrium Price?
strawberries bought (a) An increase in demand, without a change
(a) increases and the price might rise, fall or in supply.
not change. (b) A decrease in supply accompanied by an
(b) does not change but the price rises. increase in demand.
(c) does not change but the price falls. (c) A decrease in supply without a change in
demand.
(d) An increase in supply accompanied by a
decrease in demand.

96. When a market is in equilibrium –

(a) No shortages exist
(b) Quantity demanded equals Quantity
supplied
(c) A price is established that clears the
market
(d) All of the above are correct

97. The market of computers is not in

equilibrium then which of the
following is definitely true?
(a) The prices of computers will rise.
(b) The prices of computers will fall.
(c) The prices of computers will change
but not enough information is given
to determine the direction of change
(d) None of the above

98. If increase in demand is equal to

increase in supply, then –
(a) Equilibrium price and Equilibrium
quantity both increases.
(b) Equilibrium price and Equilibrium
quantity both decrease.
(c) Equilibrium price remains the same and
Equilibrium quantity increases.
(d) Equilibrium price remains the same and
Equilibrium quantity decreases.

99. If decrease in demand is less than

the decrease in supply, then the
Equilibrium price –
(a) Decreases
(b) Increases
(c) Does not change at all
(d) Cannot be commented on

100. If decrease in demand is less

than the decrease in supply, then
the Quantity at Equilibrium price –
(a) Increases
(b) Decreases
(c) Does not change at all
(d) Cannot be commented on