Question # 1

Normally a demand curve will have the shape

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horizontal

vertical

downward sloping

upward sloping

The demand curve slopes downward from left to right because of:

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Income effect

Substitution effect

Entry of new buyers

All of the above

Cross elasticity of Suzuki and Honda cars will be

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Positive

negative

zero

infinite

The following are causes of shift in demand EXCEPT the one

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change in income

change in price

change in fashion

change in prices of substitutes

When cross elasticity of demand for A and B is positive number, one can conclude that

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the goods are cheaper

the goods are inferior

the goods are substitutes

the goods are complements

Mr. Suleri bought 50 litters of petrol when his monthly income was Rs. 25000. Now his monthly income has risen to Rs. 50000 and he purchases 100 litres of petrol. His income elasticity of demand for petrol is

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1

100%

less than one

more than one

Income elasticity of demand for normal good is always

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1

more than one

negative

positive

This is an assumption of law of demand

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price of the commodity does not change

quantity should not change

supply should not change

income of consumer should not change

Law of demand shows relation between

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income and price of commodity

price and quantity of a commodity

income and quantity demanded

quantity demanded and quantity supplied

Irrespecitve of price, Somia always spends Rs. 100 a week on ice cream, we conculde that

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elasticity of demand is 0

elasticity of demand is 1

elasticity of demand id infinite

law of demand has been violated

If price elasticity of demand is very low, the commodity is

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necessity

luxury

substitute

not available

If demand has unit price elasticity, a change in price causes

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increase in total revenue

decrease in total revenue

no change in total revenue

indeterminate

Haris has a special taste for chicken rolls of college canteen. The owner of the canteen doubles the price of chicken roll. Haris did not respond to the increase in prices and kept on demanding the same quantity of chicken roll. His demand for chicken roll is

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perfectly elastic

perfectly inelastic

elastic

less elastic

Which one is the assumption of law of demand?

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price of the commodity should not change

quantity demand should not change

income of the consumer should not change

none of the above

Other things equal, if a good has more substitutes, its price elasticty of demand is

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larger

smaller

zero

unity

Which one can cause a change in demand

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change in income

change in supply

change in tastes

a and c of above

When the price of a product falls and as a concequence the demand for the product increase. it will be.

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Rise of demands

Fall of demand

Extension of demand

Contraction on demand

Demand is a function of

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price

quantity

supply

none

A seller can increase his sales revenue by charging a lower price, if the demand has

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e < 1

e = 1

e > 1

e = 0

The demand curve is negatively sloped due to

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Income effect

Substitution effect

Price effect

All the three

One of the following is not an exception the law of demand.

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Very high price products

Very low price products

Ignorance of consumers

Non of the above

The demand of a commodity having many substitutes is

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more elastic

less elastic

zero elastic

infinite elastic

When demand is perfectly inelastic, an increase in price will result in

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decrease in total revenue

increase in total revenue

no change in total revenue

decrease in quantity demanded

A horizontal demand curve has a price elasticity of

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zero

infinity

1

variable

The demand of a good falls when.

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Its price falls

Price of the substitute changes

its price rises

It price remain constant

One of the following will not cause a rise and fall on demand.

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Change in income

Change in weather

Discovery of a substitute

Distribution of income remaining the same

The law of demand will not be apply in case of

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Inferior goods

Superior goods

Normal goods

Non of them

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