CA FOUNDATION PAPER - 4 (BUSINESS ECONOMICS) 500+ MCQs
CHAPTER - 2 THEORY OF DEMAND AND SUPPLY MOST IMPORTANT OBJECTIVE QUESTIONS
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Chapter - 2 Theory of Demand And Supply
Theory of Demand
1. Demand for a commodity refers to:
-
(a) Desire backed by ability to pay for the commodity.
(b) Need for the commodity and willingness to pay for it.
(c) The quantity demanded of that commodity at a certain price.
(d) The quantity of the commodity at a certain price during any particular period of time.
2. Demand is the
-
(a) the desire for a commodity given its price and those of related commodities.
(b) the entire relationship between the quantity demanded and the price of a good other things remaining the same.
(c) willingness to pay for a good if income is larger enough.
(d) ability to pay for a good.
3. The quantity demanded is always expressed______
-
(a) Separately in isolation
(b) Separately with quantity supplied
(c) At a given price
(d) None of these
4. The quantity demanded is a__________
-
(a) Flow
(b) Stock
(c) Single isolated purchase
(d) Concept without reference to time.
5. In economics, Effective Demand for a thing depends on :
-
(a) Desire
(b) Means to purchase
(c) Willingness to use those means
(d) All of the above.
6. All of the following are determinants of demand except:
-
(a) Tastes and preferences.
(b) Quantity supplied
(c) Income of the consumer.
(d) Price of related goods.
7. Which of the following will affect the demand for non-durable goods?
-
(a) Disposable income
(b) Price
(c) Demography
(d) All of the above
8. The term "Ceteris Paribus" refers to_______
-
(a) Other things being equal
(b) Other things also change
(c) Other things may change
(d) None of the above
9. Ceteris Paribus, the demand for a commodity is inversely related to its price This happens because of:
-
(a) Income Effect
(b) Substitution Effect
(c) Both (a) & (b)
(d) None of above
10. Highly priced goods are consumed by status seeking rich people to satisfy their need for conspicuous consumption This is called as________
-
(a) Veblen Effect
(b) Snob Effect
(c) Helen Effect
(d) None of these
11. __________ are the commodities for which the quantity demanded rises only up to a certain level of income and decreases with an increase In money Income beyond this level.
-
(a) Inferior Goods
(b) Normal Goods
(c) Consumption Goods
(d) Durable Goods
12. When goods are substitutes, a fall In the price of one (Ceteris Paribus) leads to in the quantity demanded of its substitutes.
-
(a) Rise
(b) Fall
(c) Constant
(d) No effect
13. Which of the following will affect the demand for non-durable goods?
-
(a) Disposable income
(b) Price
(c) Demography
(d) All of the above
14. If the price of Pepsi decreases relative to the price of Coke and 7-UP, the demand for:
-
(a) Coke will decrease.
(b) 7-Up will decrease.
(c) Coke and 7-UP will increase
(d) Coke and 7-Up will decrease
15. Which of the following is an incorrect statement?
-
(a) When goods are substitutes, a fall in the price of one (ceteris pari bus) leads to a fall in the quantity demanded of its substitutes.
(b) When commodities are complements, a fall in the price of one (other things being equal) will cause the demand of the other to rise.
(c) As the income of the consumer increases, the demand for the commodity increases always and vice versa.
(d) When a commodity becomes fashionable people prefer to buy it and therefore its demand increases.
16. What will happen in the rice market if buyers are expecting higher rice prices in the near future?
-
(a) The demand for rice will increase.
(b) The demand for rice will decrease.
(c) The demand for rice will be unaffected.
(d) None of the above.
17. Conspicuous goods are also known as:
-
(a) Prestige goods.
(b) Snob goods.
(c) Veblen goods
(d) All of the above.
18. A good which cannot be consumed more than once is known as
-
(a) Durable good
(b) Non-durable good
(c) Producer good
(d) None of the above
19. A relative price is
-
(a) Price expressed in terms of money.
(b) What you get paid for babysitting your cousin.
(c) The ratio of one money price to another.
(d) Equal to a money price.
20. The price of tomatoes increases and people buy tomato puree. You infer that tomato puree and tomatoes are
-
(a) Normal goods.
(b) Complements.
(c) Substitutes.
(d) Inferior goods.
21. Chicken and fish are substitutes. If the price of chicken increases, the demand for fish will
-
(a) Increase or decrease but the demand curve for chicken will not change.
(b) Increase and the demand curve for fish will shift rightwards.
(c) Not change but there will be a movement along the demand curve for fish.
(d) Decrease and the demand curve for fish will shift leftwards.
22. Potato chips and popcorn are sub- stitutes. A rise in the price of potato chips will__________the demand for popcorn and the quantity of popcorn will____________
-
(a) Increase; increase.
(b) Increase; decrease.
(c) Decrease; decrease.
(d) Decrease; increase.
23. "High priced goods consumed by status seeking rich people to satisfy their need for conspicuous goods" is:
-
(a) Veblen effect
(b) Bandwagon effect
(c) Snob effect
(d) Demonstration effect
24. In a demand function, the demand for a product is the__________
-
(a) Independent Variable
(b) Explanatory Variable
(c) Dependent variable
(d) Complex variable
25. In a demand function, the deter- minants of demand like price, money income, tastes & preferences, etc. may be regarded as
-
(a) Dependent Variables
(b) Independent Variables
(c) Related Variables
(d) Complex variables
Law of Demand
26. The Law of Demand, assuming other things to remain constant, estab- lishes the relationship between:
-
(a) Income of the consumer and the quantity of a good demanded by him
(b) Price of a good and the quantity demanded.
(c) Price of a good and the demand for its substitute.
(d) Quantity demanded of a good and the relative prices of its complementary goods.
27. When Price of a commodity increases what will be the affect on Quantity demanded?
-
(a) Increases
(b) Decreases
(c) No change
(d) None of these
28. An increase in the demand for computers, other things remaining same, will:
-
(a) Increase the number of computers bought.
(b) Decrease the price but increase the number of computers bought.
(c) Increase the price of computers.
(d) Increase the price and number of computers bought.
29. In case of Normal goods, Rise in price leads to_________?
-
(a) Fall in demand
(b) Rise in demand
(c) No Change
(d) Initially rise then ultimately fall
30. A decrease in the demand for cameras, other things remaining the same will.
-
(a) Increase the number of cameras bought.
(b) Decrease the price but increase the number of cameras bought
(c) Increase the price of cameras
(d) Decrease the price and decrease in the number of cameras bought
31. Comforts lies between
-
(a) Inferior goods and necessaries
(b) Luxuries and inferior goods
(c) Necessaries and luxuries
(d) None of the above
32. If price of the commodity increases, what will be the effect on Quantity demanded?
-
(a) Decreases
(b) Increases
(c) No change
(d) Can't say
33. Who has given the law of Demand?
-
(a) Alfred Marshall
(b) Paul Samuelson
(c) Robbins
(d) J.B. Say
34. A Table which represents the different prices of a good and the corresponding quantity demanded per unit of time is called as________
-
(a) Demand Curve
(b) Demand Table
(c) Demand Schedule
(d) Demand Tabulation
35.. The Demand Schedule depicts________relationship between price and quantity demanded.
-
(a) Direct
(b) Inverse
(c) Adverse
(d) None of these
36._________ is a graphical presentation of the_________
-
(a) Demand Curve, Demand Schedule
(b) Demand Schedule, Demand Curve
(c) Demand Curve, Supply Schedule
(d) Supply Curve, Demand Schedule
37. All but one of the following are assumed to remain the same while drawing an individual's demand curve for a commodity. Which one is it?
-
(a) The preference of the individual
(b) His monetary income.
(c) Price of the commodity
(d) Price of related goods
38.. The demand curve has a__________Slope.
-
(a) Positive
(b) Negative
(c) Circular
(d) No
39.The_________sloping Demand Curve is in accordance with the law of demand which describes _________ price demand relationship.
-
(a) Upward, inverse
(b) Downward, Inverse
(c) Upward, direct
(d) Download, direct
40. The sum of individual demands for a product at a price per unit of time is called as_________
-
(a) Firm's Demand
(c) Market Demand
(c) Goods available in market
(d) Goods to be sold in market.
41. The table which represents the sum of various quantities demanded by different consumers in the market is called as____________
-
(a) Demand Schedule
(b) Individual Demand Schedule
(c) Market Demand Schedule
(d) Market Demand Curve.
42. The market Demand Schedule indicates__________ relationship between price and quantity demanded of a commodity.
-
(a) Direct
(b) Inverse
(c) Circular
(d) No
43. If we plot the market demand schedule on a graph, we get_________.
-
(a) Demand Chart
(b) Market Demand Chart
(c) Demand Curve
(d) Market Demand Curve
44. The lateral summation of indivisual demand Curves is regarded as_________
-
(a) Economy Demand Curve
(b) Market Demand Curve
(c) Product Demand Curve
(d) Marginal Demand Curve
45. According to________ the consumer has diminishing utility for each additional unit of a commodity and therefore, he will be willing to pay only less for each additional unit.
-
(a) Marshall
(b) Robbins
(c) Samuelson
(d) None of these
46. A Consumer maximizes his satisfaction when the Marginal utility of the commodity is__________Its price.
-
(a) Equal to
(b) Less than
(c) More than
(d) Less than or equal to
47. The operations of diminishing marginal utility and the act of the Consumer to equalize the utility of the commodity with its price result in a___________ demand curve.
-
(a) Downward Sloping
(b) Upward Sloping
(c) Straight line
(d) Hyperbola upward
48. In which of the following cases, the law of demand holds true?
-
(a) Normal Goods
(b) Giffen Goods
(c) Speculative Goods
(d) Necessary Goods
49. Higher the price of diamonds, higher is the prestige value attached to them and hence higher is the demand for them These goods are called as
-
(a) Conspicuous goods
(b) Giffen goods
(c) Normal goods
(d) None of these
50. Which one of the following is an exception to the law of demand?
-
(a) Future expectations about prices
(b) Demand for necessaries
(c) Speculative Goods
(d) All of these
51. For what type of goods does demand fall with a rise in income levels of households?
-
(a) Inferior goods
(b) Substitutes
(c) Luxuries
(d) Necessities
52. In case of inferior goods, with rise of income of consumes, demand of goodwill?
-
(a) Increases
(b) Decreases
(c) No change
(d) None of these
53. In the case of a Giffen good, the demand curve will be:
-
(a) Horizontal.
(b) Downward-sloping to the right .
(c) Vertical
(d) Upward-sloping to the right.
54. In case___________ there is an inverse relationship between income and demand for a product.
-
(a) Substitute goods
(b) Complementary goods
(c) Giffen Goods
(d) None of the above
Expansion & Contraction of DD
55. In Economics, when demand for a commodity increases with a fall in its price it is known as:
-
(a) Contraction of demand.
(b) Expansion of demand.
(c) No change in demand.
(d) None of the above.
56. When, as a result of increase in price, the quantity demanded decreas- es, it is called as_________
-
(a) Expansion of Demand
(b) Increase in demand
(c) Both (a) & (b)
(d) None of these
57. The change in demand will be regarded as expansion of demand, if the increase in quantity demanded is due to________
-
(a) Price of Related Goods
(b) Price of goods
(c) Change in income
(d) Change in Taste & Preferences
58._______refers to a change along a curve i.e. movement from one point to another on the same curve.
-
(a) Expansion/Contraction of Demand
(b) Increase/Decrease in Demand
(c) Shift of Demand Curve
(d) None of these.
59. Movement along the demand curve may be due to_________
-
(a) Expansion of Demand
(b) Contraction of Demand
(c) Increase/Decrease in Demand
(d) Both (a) & (b)
60. Contraction of demand is the result of:
-
(a) Decrease in the number of consumers
(b) Increase in the price of the good concerned
(c) Increase in the prices of other goods.
(d) Decrease in the income of purchasers.
61. A movement along the demand curve for soft drinks is best described as:
-
(a) An increase in demand
(b) A decrease in demand
(c) A change in quantity demanded
(d) A change in demand
Increase & Decrease in DD
62. If price decreases from 780 to 60 and elasticity of demand is 1.25 then________
-
(a) Demand increase by 25%
(b) Demand decrease by 25%
(c) Remains constant
(d) None of the above
63. Which of the following statements about price elasticity of demand is correct?
-
(a) Price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the price of that good
(b) Price elasticity of demand is computed as the percentage change in quantity demanded divided by the percentage change in price.
(c) Price elasticity of demand in the long run would be different from that of the short run.
(d) All the above.
64. In the case of a straight line demand curve meeting the two axes, the price-elasticity of demand at the mid-point of the line would be:
-
(a) 0
(b) 1
(c) 1.5
(d) 2
65. The Concept of point elasticity is used for measuring price elasticity where the change in price is_______
-
(a) Finite
(b) Limited
(c) infinite
(d) none of the above
Income Elasticity of Demand
66. Suppose a consumer's income increases from 30,000 to 36,000. As a result, the consumer increases her purchases of compact discs (CDs) from 25 CDs to 30 CDs. What is the consumer's income elasticity of demand for CDs? (Use Arc Elasticity Method)
-
(a) 0.5
(b) 1.0
(c) 1.5
(d) 2.0
67. The quantity purchased remains constant irrespective of the change in income. This is known as
-
(a) Negative income elasticity of h demand.
(b) Income elasticity of demand less than one.
(c) Zero income elasticity of demand.
(d) Income elasticity of demand is greater than one.
'
68. When income increases the money spent on necessaries of life may not increase in the same proportion. This means:
-
(a) Income elasticity of demand is zero.
(b) Income elasticity of demand is one.
(c) Income elasticity of demand is greater than one.
(d) Income elasticity of demand is less than one.
Cross Elasticity of Demand
69. Cross elasticity of demand refers to the quantities of commodity which will be demanded in response to__________ keeping other things remaining the same.
-
(a) Income of consumer
(b) Price of same commodity
(c) Price of Related commodity
(d) Both (b) & (c)
70. In case of substitute commodities, the cross demand curve slopes__________
-
(a) Upwards
(b) Downwards
(c) Circular
(d) Parabolic
71. There is a_________ relationship between price of a commodity and the demand for its complementary goods (other things remaining the same)
-
(a) Inverse
(b) Positive
(c) Direct
(d) Any of (b) & (c)
72. Cross elasticity of perfect substitutes is:
-
(a) Zero
(b) Negative
(c) One
(d) Infinity
73. The cross elasticity between Bread and DVDs is:
-
(a) Positive.
(b) Negative.
(c) Zero.
(d) One.
Advertisement Elasticity
74. Advertisement elasticity of sales or promotional elasticity of demand is the responsive of a good demanded to changes in__________
-
(a) Price of Commodity
(b) Per Unit advertisement budget
(c) Firms spending on advertising
(d) Firms spending on distribution.
75. Usually, higher the value of advertising elasticity, greater will be the responsiveness of demand to change in advertisement. Therefore, usually advertising elasticity of demand is typically__________
-
(a) Positive
(b) Unitary
(c) Negative
(d) Zero
76. Advertisement elasticity of demand values between_________and__________
-
(a) One, infinity
(b) Zero, infinity
(c) Zero, one
(d) (-) Infinity to (+) Infinity
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