Free The Demand Curve 02 Practice Test - 11th Grade - Commerce
Question 1
If we expect a rise in price in near future of a commodity, then demand will increase. State true or false.
True
False
SOLUTION
Solution : A
If an increase in price is expected, consumers will want to stock more of a commodity. Hence, the demand will increase.
Question 2
Average income increases from INR 20,000 p.m. to INR 22,000 p.m. Quantity demanded per month increases from 5000 to 6000 units. Which of the following is correct?
Demand is price inelastic
The good is inferior
Income elasticity is -2
The product has a positive income elasticity of demand
SOLUTION
Solution : D
The percentage change in demand is +20%; the percentage change in income is +10%. This means the product is normal because demand rises with more income and has an income elasticity of +2.
Question 3
If the demand is price inelastic:
An increase in price must raise profits
An increase in price decreases revenue
An increase in price increases revenue
A decrease in price reduces sales
SOLUTION
Solution : C
This means that the percentage change in quantity demanded is less than the percentage change in price; this means a price increase will increase revenue.
Question 4
For an inferior good with a downward sloping demand curve:
The price elasticity of demand is negative; the income elasticity of demand is negative.
The price elasticity of demand is positive; the income elasticity of demand is negative.
The price elasticity of demand is negative; the income elasticity of demand is positive.
The price elasticity of demand is positive; the income elasticity of demand is positive.
SOLUTION
Solution : A
A. For an inferior good demand falls as income increases. The quantity demanded falls as price increases; this means the income elasticity and the price elasticity will both be negative.
Question 5
For a normal good with a downward sloping demand curve:
The price elasticity of demand is negative; the income elasticity of demand is negative.
The price elasticity of demand is positive; the income elasticity of demand is negative.
The price elasticity of demand is negative; the income elasticity of demand is positive.
The price elasticity of demand is positive; the income elasticity of demand is positive.
SOLUTION
Solution : C
The price elasticity of demand is negative; the income elasticity of demand is positive.
Question 6
An individual demand curve slopes downward to the right because of the:
Working of the law of diminishing marginal utility
Substitution effect of decrease in price
Income effect of fall in price
All of the above
SOLUTION
Solution : D
All three are reasons why an individual demand curves slopes downward to the right.
Question 7
Which of the following is not a determinant of a consumer's demand for a commodity?
Income
Population
Prices of related goods
Tastes
SOLUTION
Solution : B
Population is not a determinant of a consumer's demand for a commodity.
Question 8
If consumer income declines, then the demand for
normal goods will increase.
inferior goods will increase.
substitute goods will increase.
complementary goods will increase.
SOLUTION
Solution : B
If consumer income declines, then the demand for inferior goods increases.
Question 9
Which of the following will not decrease the demand for a normal good?
The price of a substitute decreases
Increase in income
The price of a complementary good increases
price of the good decreases
SOLUTION
Solution : B
With an increase in income, the demand for normal goods increase.
Question 10
Which of the following would increase aggregate demand?
Increased saving
Increasing import spending
Increased taxation revenue
Increased investment
SOLUTION
Solution : D
Aggregate demand increases with increase in investment.