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

Accepted Answer

In drawing an individual demand curve, the price of the commodity under consideration is not kept constant; it is the variable that changes to show how quantity demanded varies with price. All other factors (A, B, D) are held constant to isolate the effect of price changes on quantity demanded.

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

Accepted Answer

When an individual's income rises, the demand for normal goods typically increases because people have more money to spend and are willing to buy more of these goods.

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

Accepted Answer

Inferior goods are those goods for which demand increases when income decreases, assuming all other factors remain constant. This is because consumers may switch to less expensive alternatives as their purchasing power declines.

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

Accepted Answer

When the price of a substitute commodity falls, consumers are more likely to purchase the substitute instead of commodity X, leading to a decrease in the demand for X.

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

Accepted Answer

The coefficient of price elasticity of demand is zero when the quantity demanded remains unchanged as the price of the commodity falls, indicating perfectly inelastic demand.

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

Accepted Answer

The answer of If the income elasticity of demand is...

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

Accepted Answer

Giffen goods are an exception to the law of demand because as their prices increase, people consume more of them, contrary to what the law of demand would predict. This behavior is typically due to the lack of close substitutes and the fact that these goods take up a significant portion of the consumer's budget.

Question 8

The law of diminishing marginal utility was popularized by:
A)keynes
B)marshall
C)smith
D)samuelson

Accepted Answer

The law of diminishing marginal utility was popularized by Alfred Marshall, a British economist known for his significant contributions to the principles of economics.

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

Accepted Answer

Necessity goods have an income elasticity of demand between 0 and 1, indicating that demand increases with income, but at a slower rate than income increases. An elasticity of 0.4 fits this description.

Question 10

Cross elasticity of demand in the case of substitutes:
A)zero
B)negative
C)positive
D)infinity

Accepted Answer

The cross elasticity of demand for substitutes is positive because as the price of one good increases, the demand for its substitute increases.

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

Accepted Answer

When a small change in price leads to an infinitely large change in quantity demanded, the demand is described as perfectly elastic. This means consumers are extremely sensitive to price changes.

Question 12

Net addition to total utility when one more unit is consumed is:
A)au
B)mu
C)mc
D)tu

Accepted Answer

Marginal utility (MU) refers to the net addition to total utility when one more unit of a good or service is consumed. It measures the change in total utility from consuming an additional unit.

Question 13

Most important determinant of demand is :
A)income
B)wealth
C)price
D)advertisement

Accepted Answer

The most important determinant of demand is price, as it directly affects how much of a good or service consumers are willing and able to purchase at a given time. Changes in price typically have an immediate effect on demand, making it a primary factor in the law of demand, which states that, all else being equal, as the price of a product increases, quantity demanded decreases, and vice versa.

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

Accepted Answer

The answer of Which of the following is the reason...

Question 15

Net addition to total cost is called:
A)marginal cost
B)average cost
C)fixed cost
D)variable cost

Accepted Answer

Marginal cost refers to the increase in total cost that arises from producing one additional unit of a good or service. It is the cost of producing one more unit of a product.

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

Accepted Answer

Market equilibrium is achieved when the quantity demanded by consumers equals the quantity supplied by producers, hence it is determined by the balancing of the forces of demand and supply.

Question 17

When there are only few sellers of the commodity, the market is called:
A)monopoly
B)duopoly
C)oligopoly
D)monopsony

Accepted Answer

Oligopoly is a market structure characterized by a small number of sellers, making it distinct from monopoly (one seller), duopoly (two sellers), and monopsony (one buyer).

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

Accepted Answer

A positive slope in the supply curve indicates that as the price of the commodity increases, the quantity supplied also increases. This is because suppliers are willing to supply more of the commodity at higher prices, leading to an increase in the quantity supplied, not an increase in supply itself. The term "increase in supply" would imply a shift of the supply curve, which is not the case here.

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

Accepted Answer

When the market supply of a commodity decreases while demand remains unchanged, the equilibrium price rises due to increased scarcity of the commodity. However, the equilibrium quantity falls because there is less of the commodity available for sale.

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

Accepted Answer

The elasticity of supply for a positively sloped straight line supply curve that intersects the price axis is greater than one because the percentage change in quantity supplied is greater than the percentage change in price.

Quiz 3: Demand and Elasticity

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

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

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

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

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

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

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

The law of diminishing marginal utility was popularized by:

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

Cross elasticity of demand in the case of substitutes:

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

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

Most important determinant of demand is :

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

Net addition to total cost is called:

The market equilibrium for a commodity is determined by :

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

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

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

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