ECONOMICS TEST

Q1. The concept of demand demonstrates that-

a. Demand is always with reference to price
b. Demand is referred to in a given period of time
c. Buyer’s ability and willingness to pay
d. All of the above

Q2. Individual demand is also called-

a. Industrial demand c. Household’s demand
b. Market demand d. All of the above

Q3. A demand schedule is shown as-

a. A result of increase in the size of the family
b. A result of change in tastes and preferences
c. A function of price
d. All of the above

Q4. Indirect demand of a good is also known as ______________ demand.

a. Direct c. Joint
b. Derived d. Competitive

Q5. If the price of inferior goods fall, the demand for them will ______________.
a. Rise c. Remain constant
b. Fall d. Become zero

Q6. If quantity demanded of good ‘x’ is plotted against the price of its substitute good ‘y’, the
demand curve will be-
a. Vertical Straight line c. Horizontal Straight line
b. Positively sloped d. Negatively sloped

Q7. Income effect on demand of a good is ____________.

a. Positive for normal goods c. Negative for normal goods
b. Always positive d. Always negative

Q8. Substitution Effect subscribe to the inverse relation between Px and Qx in case of-
a. Normal goods only c. Normal and inferior goods both
b. Inferior goods only d. None of the above

Q9. _________________ refers to the effect of change in the price of a product on the consumer’s
purchasing power.
a. Real Income Effect c. Substitution effect
b. Consumer’s surplus d. None of the above

Q10. Consumers buy a good till Px = MUx. If the price falls, the consumer will reach equilibrium
a. At a lower quantity c. At a higher quantity
b. At zero quantity level d. All of the above
Q11. In case of Normal goods, demand curve shows:
a. A negative slope c. Zero slope
b. A positive slope d. None of these

Q12. The tendency of low income group to imitate the consumption pattern of high income group is
known as _________________ effect.
a. Demonstration c. Prestige
b. Copy d. Veblen

Q13. When price changes and proportional change in market demand is more than proportionate
change in individual demand implies that the market demand curve is ________________ than the
individual demand curves.
a. Steeper c. Vertical
b. Flatter d. None of the above

Q14. When the quantity of a good that a buyer demands rises when there is growth of purchases by
other individuals, such an effect is called _____________.
a. Bandwagon effect c. Veblen effect
b. Snob effect d. None of the above

Q15. The market demand curve in case of Veblen Effect is _________________.

a. Steeper c. Vertical
b. Flatter d. Horizontal

Q16. When the quantity of a commodity that an individual buyer demand falls in response to the
growth of purchases by other buyers, such an effect is called_____________.
a. Bandwagon effect c. Veblen effect
b. Snob effect d. None of the above

Q17. The demand curve for Bajra will __________ when a poor person’s income rises.
a. Shift to the right c. Be downward sloping
b. Shift to the left d. None of the above

Q18. If more is demanded at the same price or the same quantity is demanded at a higher price, it is
known as-
a. Extension of demand c. Increase in demand
b. Contraction of demand d. Decrease in demand

Q19. A movement along the demand curve means-

a. Expansion of demand c. Changes in the quantity demand
b. Contraction of demand d. All of the above

Q20. A rational consumer is a person who-

a. Behaves judiciously all the time
b. Is not influenced by the advertisement
c. Knows the prices of goods in different markets and buy the cheapest
d. Has perfect knowledge of the market
Q21. Conspicuous good are also known as-
a. Prestige goods c. Veblen goods
b. Snob goods d. All of the above

Q22. The concept of Elasticity of Demand whenever referred unless otherwise specified always
means-
a. Price Elasticity of demand c. Cross Elasticity of demand
b. Income Elasticity of demand d. All of the above

Q23. When there is no change in quantity demanded in response to any change in price, it is a
situation of-
a. Infinite price elasticity c. Zero price elasticity
b. Unitary price elasticity d. High price elasticity

Q24. Coefficient of price elasticity of demand ranges from _____________ to ___________.

a. One; Infinity c. Zero; Infinity
b. Zero; One d. None of the above

Q25. When there is an infinite demand at a particular price and demand becomes zero with a slight
rise in the price then _____________.
a. Demand by commodity is perfectly elastic
b. Ed = ∞
c. Demand curve is horizontal straight line parallel to X- axis
d. All the above

Q26. When demand curve is parallel to X- axis, elasticity of demand is-

a. Unity c. Greater than unity
b. Zero d. Infinity

Q27. As the demand curve becomes flatter and flatter, the elasticity of demand becomes-
a. Higher c. Equal to infinity
b. Lower d. Equal to zero

Q28. If you spend more on rent on soap, your price elasticity of demand for housing is likely to be-
a. Greater than your price elasticity of demand for soap
b. Less than your price elasticity of demand for soap
c. Equal to your price elasticity of demand for soap
d. None of the above

Q29. Availability of close substitutes makes the demand-

a. Less elastic c. Perfectly elastic
b. More elastic d. Perfectly inelastic

Q30. All but one of the following commodities has elastic demand. Which one has inelastic demand?
a. Coca- Cola c. Butter for poor person
b. Cigarettes d. Electricity
Q31. A consumer buy 40 units of a commodity at Rs. 5 per unit. Its Ed = -3. How much commodity of
quantity he will buy at Rs 6 per unit?
a. 15 units c. 17 units
b. 22 units d. 24 units

Q32. Which one of the following is income inelastic product/ service?

a. Air travel c. Life Saving Drugs
b. Visit to water park d. Dinner at a five star hotel

Q33. The responsiveness of demand of a commodity to the change in income is known as-
a. Price elasticity of demand c. Cross elasticity of demand
b. Income elasticity of demand d. None of the above

Q34. The responsiveness of the change in quantity demanded of one commodity due to achange in
the price of another commodity is known as-
a. Price elasticity of demand c. Cross elasticity of demand
b. Income elasticity of demand d. None of the above

Q35. Cross elasticity of demand between two perfect substitutes will be-
a. Low c. Infinity
b. Very high d. Very low

Q36. Complementary goods like tea and sugar have a ___________________ cross elasticity of
demand
a. Negative c. Zero
b. Positive d. Infinite

Q37. Want satisfying power of a commodity is called –

a. Consumption c. Production
b. Utility d. Value addition

Q38. The utility of a commodity is ____________.

a. Its accepted social value c. The fact that it is wanted by some people
b. The extent to which it is of practical use d. Its relative scarcity

Q39. _________________ is the addition made to the total utility by the consumption of additional
unit of a commodity
a. Marginal Utility c. Average Utility
b. Total Utility d. Ordinal Utility

Q40. Total utility is ________________, when marginal utility is positive

a. Maximum c. Increasing
b. Diminishing d. Minimum

Q41. MU of a particular commodity at the point of saturation is-

a. Zero c. Greater than unity
b. Unity d. Less than unity
Q42. TU starts diminishing when-
a. MU is positive c. MU is negative
b. MU is increasing d. MU is constant

Q43. _________ states that marginal utility of a good diminishes as the consumer consumes
additional units of a good.
a. The Law of Equi-Marginal Utility c. Revealed Preference theory
b. The Law of Diminishing Marginal Utility d. None of the above

Q44. The doctrine of consumer’s surplus is based on __________.

a. Elasticity of Demand c. Law of Substitution
b. Indifference Curve Analysis d. Law of Diminishing Marginal Utility

Q45. Buyer’s surplus is highest in the case of ____________.

a. Luxuries c. Necessaries
b. Comforts d. All of the above

Q46. Consumer’s surplus means-

a. Difference between market price and individual price
b. Difference between actual and potential price
c. Low price is prevailing
d. Happiness of the consumer

Q47. An indifference curve is ___________.

a. Downward sloping and convex to origin c. Downward sloping and concave to origin
b. Upward sloping and convex to origin d. Vertical and parallel to y- axis

Q48. The slope of indifference curve show-

a. Marginal rate of substitution c. Elasticity of indifference curve
b. Level of satisfaction to the consumer d. None of the above

Q49. A higher IC denotes-

a. A higher level of satisfaction c. Same level of satisfaction
b. A lower level of satisfaction d. None of the above

Q50. The slope of IC tends to diminish as we move down the curve means-
a. MRS is constant c. MRS is decreasing
b. MRS is increasing d. None of the above.