Question # 1

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

Cross elasticity of Suzuki and Honda cars will be

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Positive

negative

zero

infinite

This is the assumption of law of demand

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price of the commodity should not change

Quantity demanded should not change

Price of substitutes should not change

Demand curve must be linear

Price and demand are positively correlated in case of

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necessities

comforts

Giffen goods

Luxuries

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 elasticity of demand is very low it shows that the commodity is

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a necessity

a luxury

has little importance in total budget

a and c above

Wit rapid economic growth in a country the individual demand curve will:

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Rise

Fall

Extend

Contract

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

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

To say that two goods are unrelated, their cross price elasticity of demand should be

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less than 0

greater than 0

equal to 0

1

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

If price and total revenue move in the same direction, then demand is

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inelastic

elastic

unrelated

perfectly elastic

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

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larger

smaller

zero

unity

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 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

Which one is not determinant of demand

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tastes

income

method of production

price

The law demand will not be valid in case of.

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Very high price products

Normal goods

Price effect

Income effects

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

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

If quantity demanded is completely unresponsive to changes in price, demand is

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inelastic

unit elastic

elastic

perfectly inelastic

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

When price elasticity of demand for normal goods in calculated, the value is always

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positive

negative

constant

greater than one

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

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

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necessity

luxury

substitute

not available

The elasticity of demand of durable goods is

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less than unity

greater than unity

equal to unity

zero

Demand is a function of

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price

quantity

supply

none

Income elasticity of demand for normal good is always

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1

more than one

negative

positive

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