EXERCISE

1. Objective Type Questions

A. Multiple Choice Questions: Choose the Correct Answer
Specific quantity to be purchased against a specific price of the commodity is called:

(a) demand (b) quantity demanded

(c) movement along the demand curve (d) shift in demand curve

2. Downward slope of the demand curve shows:

(a) positive relationship between price and quantity demanded
(b) inverse relationship between price and quantity demanded
(c) no relationship between price and quantity demanded
(d) none of these
3. How are the two goods (apples and oranges) related when, as a result of rise in the price of apples
demand for oranges increases?
bnemsd ni senso
(a) Substitute goods (b) Complementary goods
(c) Normal goods
minoel
(d) Inferior goods
4. In case of normal
goods, demand curve shows:
(a) a negative slope (b) a positive slopepns
c) zero slope (d) none of these
5. Law of demand must fail in case of:
o/uth
(a) normal goods (b) Giffen goods n
(c) inferior goods (d) none of these
6. Inferior goods are those whose income effect is:
(a) negative (b) positive
(c) zero (d) none of these
7. Which of the following pairs represents substitute goods?
(a) Car and petrol (b) Juice and cold drink
(c) Bread and butter (d) All of these
8. In case of Giffen's Paradox, the slope of demand curve is:
(a) negative (b) positive oboogjerta
(c) parallel to X-axis (d) parallel to Y-axis
9. As a result of rise in consumer's income, demand curve for coarse
grain (inferior good):
(a) becomes a horizontal straight line (b) becomes a vertical straight line
(c) shifts to the right (d) shifts to the left
10. If two goods are complementary then rise in the price of one
results in:
(a) rise in demand for the other (b) fall in demand for the other
(c) rise in demand for both (d) none of these

130 Introductory Microeconomics

11, Demand curve is upward sloping for:
(a) normal goods
(b) inferior goods
(c) Giffen goods
(d) none of these
9 Movement along the demand curve
occurs due to
(a) own price of the commodity
change in:
(b) determinants of demand, other than own price of the
(c) both (a) and (b)
commodity
of these
lo ameseees ses
(d) none

13 An increase in the price of electricity will cause the demand for electric
(a) rise appliances to:
(b) fall
(c) remain the same
(d) none of these
14. Shift in demand curve means:
(al fall in demand due to rise in own price of the commodity
demand due to fall in own
oft
(b) rise in price of the commodity
(c) change in demand due to factors other than own price of the commodity
(d) none of these nsid en qoqgs ee0or0.8
15. Afall in income of the consumer (in case of normal goods) will cause: 310gep o 9002 1
(a) upward movement on the demand curve
(b) downward movement on the demand curve
(c) rightward shift of the demand curve
(d) leftward shift of the demand curve
16. Change in quantity demanded of a commodity due to change in its own price, other things remaining
constant, is called:
(a) cross price effect (b) price effect
(c) income effect (d) substitution effecto lo wsler
17. In case of contraction of demand, we move: bs
(a) from lower point to upper point on the same demand curve
(6) to right on the another demand curve mos cboc1otolo se
(C) from upper point to lower point on the same demand curve
(d) to left on the another demand curve

18. Increase in demand occurs due to:

la) decrease in price of the complementary good
(0) increase in income of the consumer
nemetsde poikeliolontetefe
) increase in price of the substitutes
(d) all of these
.Assumptions of the law of demand refer to:
la) constant own price of the commodity
determinants of demand, other than own price of the commodity
c) constant cost of
production
(d) none of these
Theory of Demand 131
 20. Law of demand is violated when:
(a) income effect is negative
(b) substitution effect is negative oe
(c) negative income effect is greater than
substitution effect e t at nols te
(d) negative income effect is less than substitution
effect
21. A fall in own price of the commodity leads to: ode
(a) increase in real income of the consumer
(b) decrease in real income of the consumer

(c) increase in purchasing power of the consumer bheso1o ntseso

(d) both (a) and (c)

Answers
1. (b) 2. (b) 3. (a) 4. (a) 5. (b) 6. (a) 7. (b) 8. (b) 9. (d) 10. (b)
11. (c) 12. (a) 13. (b) 14. (c) 15. (d) 16. (b) 17. (a) 18. (d) 19. (b) 20. (c)
21. (d)
E.Concept-based Objective Questions bnemsb lo
1. Define demand.
Ans. Demand refers to the desire to have a commodity backed by willingness and ability to purchase that
commodity at given price during a period of time. nenpd
What is meant by quantity demanded?
2.
S.Quantity demanded refers toa specific quantity to be purchased against a specific price ofthe commodity.
3. What is a demand schedule?
A Demand schedule is a table which shows the relationship between price and quantity demanded of
Ans.
a commodity.

4. What is a demand curve?

Ans. Demand curve is a graphic presentation of demand schedule showing inverse relationship between
price and
quantity demanded of a commodity.

Theory of Demand 133

 5. Name two determinants of consumer's demand for a commodity.

Ans. w o determinants of consumer's demand for a commodity are:

i) Own price of the commodity, and
(i) Income of the consumer
6. What is the slope of demand curve like?
Ans. Demand curve slopes downward from left to right, indicating inverse relationsnip oetween price and

quantity demanded of a commodity.

7, What is the slope of demand curve for Giffen goods?
Ans. Slope of demand curve for Giffen goods is upward sloping, indicating positive relatonship between
price and quantity demanded of a commodity.
8. Define normal goods.
Ans. Normal goods are those goods in case of which there is a positive relationship between consumer's
income and quantity demanded. Implying that income effect is positive.
9. Define inferior goods.
Ans. Inferior goods are those goods in case of which there is a negative relationship between consumer's
income and quantity demanded. Implying that income effect is negative.
10. Define Giffen goods.
Ans. Giffen goods are those inferior goods in the case of which there is a positive relationship between
price and quantity demanded.
11. What do you understand bysubstitutes?
Ans. Substitute goods are those goods which can be substituted for each other.
12. What is meant by complementary goods?
Ans. Complementary goods are those goods which complete the demand for each other.
13. What does the movement on the same demand curve show?
Ans. Movement on the same demand curve shows extension or contraction of demand
14. What does the shifting of a demand curve show?
Ans. Shifting of a demand curve shows increase or decrease in demand.
15. What is meant by extension of demand?
Ans. When quantity demanded of a commodity increases due to decrease in own price of the commodity
other factors remain constant, it is a situation of extension of demand.
16. What is meant by contraction of demand?
Ans. When quantity demanded of a commodity decreases due to increase in own price of the commo
other factors remain constant, it is a situation of contraction of demand.

17. Define increase in demand.

Ans. When quantity demanded of a commodity increases as a result of change in other factors (otne
than own price of the commodity), it is called increase in demand.

18. Define decrease in demand.

Ans. When quantity demanded of a commodity decreases as a result of change in other factors (other
than own price of the commodity), it is called decrease in demand.

19. If the quantity demanded of Good-X decreases as the

household income increases, what type eof

good is X?
Ans. Good-X is an inferior good.

Introductory Microeconomics
134
0 1f the demand for Good-Y Increases as price of another Good-X
rises, how
related? are the two goods
Ans. The two goods (X and Y) are substitute goods.
21 What happens to the demand for a
commodity rises?
complementary good of a commodity when the price of the
Ans, Demand for a complementary good decreases when the
curve will shift to the left.
price of the commodity rises. Demand

22. If the demand for CNG increases as price of petrol

increases, how are these two goods related?
Ans. CNG and petrol are substitute goods.n
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