Deck 3: Demand and Elasticity

Question 1

In drawing an individual demand curve for a commodity, all but which of the following are kept constant:

A)individual's money income
B)the prices of the related commodity
C)price of the commodity under consideration
D)tastes of the consumer

Answer 1

price of the commodity under consideration

Question 2

When an individual's income rises, when everything else remains the same, his demand for normal goods:

A)rises
B)falls
C)remains the same
D)any of the above is possible

Answer 2

rises

Question 3

When an individual's income falls, when everything else remains the same, his demand for inferior goods:

A)increases
B)decreases
C)remains unchanged
D)cannot say

Answer 3

increases

Question 4

When the price of the substitute commodity of X falls, the demand for X:

A)rises
B)falls
C)remains unchanged
D)all of the above is possible

Question 5

If the quantity demanded remains unchanged as the price of the commodity falls, the coefficient of price elasticity of demand is:

A)greater than
B)one equal to one
C)smaller than one
D)zero

Question 6

If the income elasticity of demand is greater than one, then the commodity is:

A)necessity
B)luxury
C)inferior
D)non-related commodity

Question 7

Which of the following is an exception to the law of demand?

A) giffen good
B)normal good
C)superior good
D)all of the above

Question 8

The law of diminishing marginal utility was popularized by:

A)keynes
B)marshall
C)smith
D)samuelson

Question 9

If the income elasticity of demand for a commodity is found to be 0.4, then the commodity concerned is:

A)luxury
B)necessity
C) giffen's goods
D)independent good

Question 10

Cross elasticity of demand in the case of substitutes:

A)zero
B)negative
C)positive
D)infinity

Question 11

If a small change in price leads to infinitely large change in quantity demanded, then the demand is:

A)perfectly elastic
B)perfectly inelastic
C)elastic
D)inelastic

Question 12

Net addition to total utility when one more unit is consumed is:

A)au
B)mu
C)mc
D)tu

Question 13

Most important determinant of demand is :

A)income
B)wealth
C)price
D)advertisement

Question 14

Which of the following is the reason for law of demand:

A)price effect
B)backlash effect
C)income effect
D)real balance effect

Question 15

Net addition to total cost is called:

A)marginal cost
B)average cost
C)fixed cost
D)variable cost

Question 16

The market equilibrium for a commodity is determined by :

A)market demand
B)market supply
C)balancing of the forces of demand and supply
D)any of the above

Question 17

When there are only few sellers of the commodity, the market is called:

A)monopoly
B)duopoly
C)oligopoly
D)monopsony

Question 18

If the supply curve of the commodity is having a positive slope, a rise in the price of the commodity, results in:

A)increase in supply
B)increase in quantity supplied
C)decrease in supply
D)decrease in quantity supplied

Question 19

From the position of stable equilibrium, the market supply of a commodity decreases, while the market demand remains unchanged, then:

A)equilibrium price falls
B)equilibrium quantity rises
C)both equilibrium price and equilibrium quantity decreases
D)equilibrium price rises, but equilibrium quantity falls

Question 20

Elasticity of supply for a positively sloped straight line supply curve that intersects the price axis is:

A)equal to zero
B)equal to one
C)greater than one
D)constant

Question 21

In which of the following market, advertisement is absent:

A)monopolistic competition
B)perfect competition
C)oligopoly
D)none of the above

Question 22

-------------- cost can never become zero.

A)variable cost
B)fixed cost
C)marginal cost
D)average cost

Question 23

If a positively sloped linear supply curve crosses the quantity axis, the elasticity of supply is:

A)inelastic
B)elastic
C)unitary elastic
D)perfectly elastic

Question 24

If a positively sloped linear supply curve passes through the origin, the elasticity of supply is

A)inelastic
B)elastic
C)unitary elastic
D)perfectly elastic

Question 25

Average cost is the sum of AVC and

A)mc
B)tc
C)afc
D)atc