Q.1 What does the law of demand state?
As price rises, demand rises
As price rises, demand falls
As income rises, demand falls
As supply rises, demand rises
Explanation - The law of demand states an inverse relationship between price and quantity demanded, keeping other factors constant.
Correct answer is: As price rises, demand falls
Q.2 Which of the following is a determinant of demand?
Production cost
Consumer income
Technology
Government subsidies
Explanation - Income directly affects consumers’ purchasing power, hence influencing demand.
Correct answer is: Consumer income
Q.3 In economics, demand refers to:
Desire to buy a product
Ability to buy a product
Desire backed by ability to purchase
Quantity supplied in the market
Explanation - Demand is not just desire, but desire supported by purchasing power and willingness to pay.
Correct answer is: Desire backed by ability to purchase
Q.4 Which curve shows the relationship between price and quantity demanded?
Supply curve
Demand curve
Indifference curve
Cost curve
Explanation - The demand curve represents how much of a good consumers are willing to buy at different prices.
Correct answer is: Demand curve
Q.5 When income of consumers rises, demand for normal goods generally:
Decreases
Remains constant
Increases
Becomes zero
Explanation - Normal goods have a positive income effect; higher income leads to higher demand.
Correct answer is: Increases
Q.6 Which type of goods show an increase in demand when income decreases?
Normal goods
Luxury goods
Inferior goods
Capital goods
Explanation - Inferior goods are those for which demand increases when income falls, such as cheaper substitutes.
Correct answer is: Inferior goods
Q.7 If the price of tea increases, the demand for coffee (a substitute) will likely:
Decrease
Increase
Remain unchanged
Fall to zero
Explanation - When the price of a substitute rises, consumers switch to alternatives, increasing demand for coffee.
Correct answer is: Increase
Q.8 Complementary goods are:
Goods consumed independently
Goods used in place of each other
Goods used together
Goods with no relationship
Explanation - Complementary goods, like bread and butter, are consumed together, so demand for one affects the other.
Correct answer is: Goods used together
Q.9 Which of the following would cause a shift in the demand curve?
Change in consumer preferences
Change in supply
Change in production technology
Change in government subsidy
Explanation - A shift occurs when demand itself changes due to factors like tastes, income, or prices of related goods.
Correct answer is: Change in consumer preferences
Q.10 A movement along the demand curve is caused by:
Change in tastes
Change in price of the good itself
Change in income
Change in population
Explanation - A movement along the curve happens only when the price of the good changes, ceteris paribus.
Correct answer is: Change in price of the good itself
Q.11 When demand is perfectly inelastic, the demand curve is:
Horizontal
Vertical
Upward sloping
Curved
Explanation - Perfectly inelastic demand means quantity demanded remains constant regardless of price, shown by a vertical line.
Correct answer is: Vertical
Q.12 The elasticity of demand measures:
Shift in supply curve
Responsiveness of demand to price change
Relationship between cost and output
Government regulation effects
Explanation - Elasticity indicates how sensitive quantity demanded is to changes in price.
Correct answer is: Responsiveness of demand to price change
Q.13 If demand is elastic, a fall in price will:
Reduce total revenue
Increase total revenue
Not affect total revenue
Make revenue zero
Explanation - In elastic demand, percentage change in demand is greater than price change, increasing total revenue when prices fall.
Correct answer is: Increase total revenue
Q.14 A demand curve generally slopes:
Upward to the right
Downward to the right
Horizontal
Vertical
Explanation - The downward slope reflects the inverse relationship between price and demand.
Correct answer is: Downward to the right
Q.15 Which factor would likely decrease the demand for petrol?
Increase in car ownership
Decrease in bus fares
Decrease in petrol prices
Rise in income
Explanation - Cheaper public transport (a substitute) reduces the demand for petrol.
Correct answer is: Decrease in bus fares
Q.16 Giffen goods are an exception to:
Law of supply
Law of demand
Law of diminishing returns
Law of substitution
Explanation - For Giffen goods, higher prices may lead to higher demand, violating the law of demand.
Correct answer is: Law of demand
Q.17 Which of the following is a luxury good?
Rice
Wheat
Jewelry
Salt
Explanation - Luxury goods have demand that rises more than proportionally as income increases.
Correct answer is: Jewelry
Q.18 Contraction of demand means:
Demand curve shifts leftward
Demand curve shifts rightward
Movement upward along the demand curve
Fall in supply
Explanation - Contraction refers to reduced quantity demanded due to higher prices, not a shift of the curve.
Correct answer is: Movement upward along the demand curve
Q.19 Which of the following will not shift the demand curve?
Change in income
Change in population
Change in price of the same good
Change in tastes
Explanation - Price changes cause movement along the curve, not a shift.
Correct answer is: Change in price of the same good
Q.20 If demand is perfectly elastic, the demand curve is:
Vertical
Horizontal
Upward sloping
Downward sloping
Explanation - Perfectly elastic demand means any price increase eliminates demand, shown by a horizontal line.
Correct answer is: Horizontal
Q.21 The market demand curve is obtained by:
Multiplying individual demands
Summing up individual demands
Subtracting supply from demand
Adding prices of goods
Explanation - Market demand is the horizontal summation of individual demand curves.
Correct answer is: Summing up individual demands
Q.22 Demand for necessities like salt is generally:
Elastic
Perfectly elastic
Inelastic
Unitary elastic
Explanation - Since people cannot reduce consumption much even with higher prices, necessities are inelastic.
Correct answer is: Inelastic
Q.23 Cross elasticity of demand measures:
Change in demand due to income change
Change in demand due to own price change
Change in demand due to price change of related goods
Change in supply due to demand change
Explanation - Cross elasticity measures how demand for one good changes when the price of another good changes.
Correct answer is: Change in demand due to price change of related goods
Q.24 If price elasticity of demand is less than 1, demand is said to be:
Elastic
Inelastic
Perfectly elastic
Unitary elastic
Explanation - When percentage change in quantity demanded is less than percentage change in price, demand is inelastic.
Correct answer is: Inelastic
Q.25 The slope of the demand curve indicates:
Marginal cost
Marginal utility
Rate of change in demand with price
Total revenue
Explanation - The slope shows how much demand changes when price changes by one unit.
Correct answer is: Rate of change in demand with price