DEMAND AND ELASTICITY OF 6.

the price of hotdogs increase by

DEMAND 22% and the qty demanded falls by
25% this indicates that demand for
1. demand for a commodity refers to;
hotdogs is
a) desire of the commodity
a) .elastic
b) need for the commodity
b) inelastic
c) quant demanded of that
c) unitary elastic
commodity
d) perfectly elastic
d) qty of the commodity demanded at
a certain price during any particular
7. which factors generally keeps the price
period of time.
elasticity of demand for a good low:
a) variety of uses for that good
2. in case of an inferior good, the
b) its low price.
income elasticity of demand is:
c) close substitute for that good
a) positive
d) high proportion of the consumers
b) zero
income spent on it
c) negative.
d) infinite
8. in case of straight line demand curve
3. for what type of good does demand meeting the two axis, the price elasticity at
fall with a rise in income level of that mid point of the line would be
households? A) 0
a) inferior. goods b) 1.
b) substitute c) 1.5
c) necessities d) 2
d) luxuries
9. an inc in demand can result from
4, in case of inferior goods like bajra, a) a decline in the market price
a fall in its price tends to: b,) an increase in income
A) reduce the demand. c) a reduction in the price of substitute
b) increase the demand d) an inc in the price of complements
c) change thr demand in an abnormal
way
d) make the demand remain constant

5. movement along the same demand

curve shows:
a) expansion of demand
b) expansion of supply
c) expansion. and contraction of
demand
d) inc and dec of demand
 10. The law of demand refers to the 14. Which of the following will cause a
 a. inverse relationship between decrease in quantity demanded while
the price of a commodity and the leaving demand unchanged?
quantity demanded of the  a. An increase in the price of a
commodity per time period. complementary good.
b. direct relationship between the  b. An increase in income when
desire a consumer has for a the good is inferior.
commodity and the amount of the  c. A decrease in the price of a
commodity that the consumer substitute good.
demands.  d. An increase in the price of the
 c. inverse relationship between a good..
consumer's income and the amount
of a commodity that the consumer 15. Which of the following will not
demands. decrease the demand for a
 d. direct relationship between commodity?
population and the market demand  a. The price of a substitute
for a commodity. decreases
 b. Income falls and the good is
11. Which of the following is not a normal
determinant of a consumer's  c. The price of a complement
demand for a commodity? increases
 a. Income  d. The commodity's price
 b. Population. increases.
 c. Prices of related goods
 d. Tastes 16. Demand curves have a negative
slope because
12. If the price of a good increases,  a. firms tend to produce less of a
then good that is more costly to produce.
 a. the demand for complementary  b. the substitution effect always
goods will increase. leads consumers to substitute higher
 b. the demand for the good will quality goods for lower quality goods.
increase.  c. the substitution effect always
 c. the demand for substitute causes consumers try to substitute
goods will increase.. away from the consumption of a
 d. the demand for the good will commodity when the commodity's
decrease. price rises..
 d. an increase in price reduces real
13. If consumer income declines, then income and the income effect always
the demand for causes consumers to reduce
 a. normal goods will increase. consumption of a commodity when
 b. inferior goods will increase.. income falls.
 c. substitute goods will increase.
 d. complementary goods will 17. If a good is normal, then a
increase. decrease in price will cause a
substitution effect that is
  a. positive and an income effect zero.
that is positive..  c. quantity demanded has
 b. positive and an income effect decreased by 10%.
that is negative.  d. all of the above are correct..
 c. negative and an income effect
that is positive. 21. The price elasticity of demand for
 d. negative and an income effect a good will tend to be more elastic if
that is negative.  a. the good is broadly defined
(e.g., the demand for food as opposed
18. If the consumption decisions of to the demand for carrots).
individual consumers are  b. the good has relatively few
independent, then substitutes.
 a. the market demand curve will  c. a long period of time is required
be flatter because of the bandwagon to fully adjust to a price change in the
effect. good.
 b. the market demand curve will  d. none of the above are true..
be steeper because of the snob effect. 22. If a good is inferior, then
 c. the market demand curve will  a. the income elasticity of demand
not be equal to the horizontal will be negative.’
summation of the demand curves of  b. the income elasticity of demand
individual consumers. will be zero.
 d. none of the above is correct..  c. the income elasticity of demand
will be positive.
19. The demand by a firm for inputs  d. a decrease in income will cause
used in the production of a demand to decrease.
commodity that the firm offers for
sale 23. If two goods are complements,
 a. is called a derived demand. then
 b. is directly related to the  a. the cross-price elasticity of
demand for the commodity. demand will be negative..
 c. is negatively sloped.  b. the cross-price elasticity of
 d. is all of the above.. demand will be zero.
 c. the cross-price elasticity of
demand will be positive.
 d. an increase in the price of one
good will increase demand for the
other.

24. The cross-price elasticity of

20. If a firm raises its price by 10% and demand between two differentiated
total revenue remains constant, then goods produced by firms in the same
 a. the price elasticity of demand industry will be
for its output is unitary.  a. negative and large.
 b. marginal revenue is equal to  b. negative and small.
  c. positive and large.. relatively elastic, compared to goods for
which there are few close substitutes.
 d. positive and small.
d) The supply of that good will be relatively
elastic, compared to goods for which there
25. Suppose that a 2% increase in price are few close substitutes.
results in a 6% decrease in quantity
demanded. Own-price elasticity of demand is 30. If – given consumer preferences – a
equal to: certain good has few close substitutes
a) 1/3. available, then:
b) 6. a) The demand for that good will be
c) 2 relatively inelastic, compared to goods for
d) 3. which there are many close substitutes.
b) The supply of that good will be
26. If own-price elasticity of demand equals relatively inelastic, compared to goods for
0.3 in absolute value, then what percentage which there are many close substitutes.
change in price will result in a 6% decrease c) The demand for that good will be
in quantity demanded? relatively elastic, compared to goods for
a) 3% which there are many close substitutes.
b) 6% d) The supply of that good will be
c) 20%. relatively elastic, compared to goods for
d) 50%. which there are many close substitutes.

27. Suppose that a 10 increase in price 31. Which element is essential for

results in a 50 percent decrease in quantity demand ?
demanded. What does (the absolute value of)
(a) Desire to consume
own price elasticity of demand equal?
a) 0.5. (b) Availability of adequate resources
b) 0.2. (c) Willingness to consume
c) 5. (d) All of these
d) 10.
32. Demand Curve generally slopes:
28. If a demand curve is VERTICAL, then (a) Upward from left to right
own-price elasticity of demand for this good (b) Downward from left to right
is equal to: (c) Parallel to X-axis
a) Infinity.
(d) Parallel to Y-axis
b) Zero.
c) One.
33. In which goods, price fall does not
d) None of the above.
make any increase in demand ?
  (a) Necessities Goods;
(b) Comfort Goods
(c) Luxuries Goods
(d) None of these

29. If – given consumer preferences – a

certain good has many close substitutes 34. Which of the following factor
available, then:
affects demand ?
a) The demand for that good will be
relatively inelastic, compared to goods for (a) Price
which there are few close substitutes. (b) Change in income
b) The supply of that good will be relatively (c) Taste of the Consumer
inelastic, compared to goods for which there (d) All of these..
are few close substitutes.
c) The demand for that good will be
35. Goods, which can alternatively be (c) Price remains stable and demand
used, are called: falls
(a) Complementary Goods (d) Price falls but demand remains
(b) Substitutes. stable
(c) Comforts
(d) None of these 42. Which is a reason of change in
demand ?
36. Which of the following is a demand (a) Change in consumer’s income
function ? (b) Change in price of related goods
(a) PX (c) Population increase
(b) DX = PX (d) All pf these
(c) Dx = (Px).
(d) None of these 43. For a change in which of the
following, there is no change in
37. When change in the price of goods-X demand ?
affects the demand of goods-Y, this (a) Change in price
demand is called: (b) Change in income
(a) Price Demand (c) Change in taste and fashion
(b) Income Demand (d) None of these.
(c) Cross Demand’
(d) All of these 44. With a rise in price the demand for
‘Giffin’ goods:
38. For normal goods, Law of Demand (a) increases.
states the relationship between price (b) decreases
and quantity of goods: (c) remains constant
(a) Direct (d) becomes unstable
(b) Positive
(c) Indirect 45. High slope of the demand Curve of a
(d) None of the above normal goods is:
(a) Negative
39. Which of the following is a reason for (b) Positive
fall in demand ? (c) Zero
(a) Fall in Income (d) Undefined
(b) Fall in Number of Buyers
(c) Fall in Taste of Consumer 46. With an increase in income
(d) All the above consumer decreases the consumption
of which goods ?
40. With rise in coffee price, the demand (a) Inferior goods
of tea: (b) Normal goods
(a) Rises (c) Giffin goods
(b) Falls (d) Both (a) and (c)
(c) Remains stable
(d) None of these

41. Contraction in demand appears

when:
(a) Price rises and demand falls
(b) Price rises and demand also rises
47. The demand curve of a good shifts (c) Perfectly Inelastic Demand
from DD’ to dd (d) Inelastic Demand

52. Which of the following shows

elasticity less than one ?
(a) Necessity Goods
(b) Comforts
(c) Luxuries
(d) All of these

(a) fail in the price of the goods 53. With which method, elasticity of
(b) rise in the price of the goods demand is measured ?
(c) rise in the price of substitute goods (a) Total Expenditure Method .
(d) rise in the price of complementary (b) Percentage or Proportionate Method
goods (c) Point Method
(d) All of these
48. Elasticity of demand is a:
(a) Qualitative Statement 54. Elastic demand is shown by:
(b) Quantitative Statement
(c) Both (a) and (b)
(d) None of the above

49. Which of the following is a formula

for measuring the elasticity of demand ?
55. What is the price elasticity in
following example ?

(a) -2.5
(b) + 3.5
(c) + 4.0
(d) None of these
50. For Giffin goods, price elasticity of
56. Which of the following factor affects
demand is :
elasticity of demand ?
(a) Negative
(a) Nature of Goods
(b) Positive.
(b) Price Level
(c) Zero
(c) Income Level
(d) None of these
(d) All of these
51. Following figure shows:
57. How many types elasticity of
demand has ?
(a) Three
(b) Five
(c)Six
(d) Seven

58. Elasticity of demand for necessities

(a) High Elastic Demand is :
(b) Perfectly Elastic Demand (a) Zero
(b) Unlimited 65. If price of goods ‘X’ falls leading to
(c) Greater than unity increase in demand of goods ‘ Y’ then
(d) Less than unity both the goods are:
(a) Substitute goods
(b) Complementary goods
(c) Not related
59. Price elasticity of demand means : (d) Competitor.
(a) Change in demand due to change in
price
(b) Change in demand
(c) Change in real income
(d) Change in Price

60. The elasticity of demand at the mid-

point of a straight line demand curve:
(a) will be zero
(b) will be unity
(c) will be infinity
(d) None of these

61. If the demand for a good changes by

60% due to 40% change in price, the
elasticity of demand is :
(a) 0.5
(b) -1.5
(c) 1
(d) zero

62. For luxury goods the demand is:

(a) Inelastic
(b) Elastic
(c) Highly elastic
(d) Perfectly Inelastic

63. Any statement about demand for a

good is considered complete only when
the following is/are mentioned in:
(a) Price of the good
(b) Quantity of the good
(c) Period of time
(d) All of these

64. Any statement about the demand of

an object is considered complete when it
is mentioned in the following:
(a) Price of good
(b) Demand of good
(c) Time period
(d) All of the above.