MCQs on Demand Theory

DEMAND

1-Demand for a commodity refers to:

a.      Need for the commodity

b.     Desire for the commodity

c.      Amount of the commodity demanded at a particular price and at a particular time

d.     Quantity demanded of that commodity

(Ans: c)

2-Which among the following statement is INCORRECT?

a.      On a linear demand curve, all the five forms of elasticity can be depicted’

b.     If two demand curves are linear and intersecting each other then coefficient of elasticity would be same on different demand curves at the point of intersection.

c.      If two demand curves are linear, and parallel to each other then at a particular price the coefficient of elasticity would be different on different demand curves.

d.     The price elasticity of demand is expressed in terms of relative not absolute, changes in Price and quantity demanded’

(Ans: b)

3-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.      Increase

b.     Decrease

c.      Remain the same

d.     Become zero

(Ans: a)

4-The horizontal demand curve parallel to x-axis implies that the elasticity of demand is:

a.      Zero

b.     Infinite

c.      Equal to one

d.     Greater than zero but less than infinity

(Ans: b)

5-An individual demand curve slopes downward to the right because of the:

a.      Working of the law of diminishing marginal utility

b.     substitution effect of decrease in price

c.      income effect of fall in Price

d.     All of the above

(Ans: d)

6-Income elasticity of demand is defined as the responsiveness of:

a.      Quantity demanded to a change in income

b.     Quantity demanded to a change in price

c.      Price to a change in income

d.     Income to a change in quantity demanded

(Ans:a)