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1.What does it indicate when the price elasticity of demand is expressed as a negative value?

The demand responds strongly to price changesThe demand shows little sensitivity to price variationsThe demand curve slopes downwardHigher income levels lead to a decrease in quantity demandedPrice changes do not affect demand

2.What does a cross elasticity of demand value of -2 indicate about the relationship between two products?

The goods are alternatives and exhibit elastic cross-price demand.The goods are alternatives and have inelastic cross-price demand.The goods are complementary and display elastic cross-price demand.The goods are complementary and show inelastic cross-price demand.No relationship can be determined from this value.

3.When the price drops from Rs 2,000 to Rs 1,800, the annual quantity demanded rises from 5,000 units to 6,000 units. Which statement below is accurate?

4.What happens to the demand for an inferior good when consumer income changes?

Demand decreases as income risesDemand falls when the price goes upDemand increases with a higher priceDemand drops when the price of substitutes decreasesDemand remains unaffected by income changes

5.What is the effect on demand when the price rises, assuming all other factors remain constant?

Demand curve shifts outwardDemand curve shifts inwardDemand decreases due to contractionDemand increases due to extension

6.What is the effect of a rise in income on the demand for an inferior good?

Increase the demand for an inferior goodDecrease the demand for an inferior goodIncrease the supply of an inferior goodDecrease the supply of an inferior goodNo change in demand or supply for an inferior good

7.What does the law of diminishing utility state?

The initial unit provides the highest satisfactionMarginal utility grows with each additional unit consumedMarginal product decreases as consumption increasesTotal satisfaction increases but at a decreasing pace with more consumption

8.What could be a possible reason for a decrease in price?

It will result in a leftward shift of the demand curveIt will trigger a rightward shift in supplyIt might occur due to a reduction in demandIt causes an increase in the quantity produced

9.In an unregulated market, rising prices allocate goods to individuals who have both the willingness and financial ability to purchase them. What is this mechanism called?

Determining quantitySetting prices artificiallyPrice rationingAdjusting supply levels

10.What type of relationship exists between two products if their cross-price elasticity of demand is negative?

Goods with normal demandProducts with no relationAlternative goodsComplementary goods

11.If the price of burgers rises by 22% and the quantity demanded decreases by 25%, how would you classify the demand for burgers?

12.If the price of apples decreases by 5% and the quantity demanded rises by 6%, how would you describe the demand for apples?

13.What can cause a leftward movement along the demand curve?

A reduction in supply.An increase in consumer income.A decline in the availability of substitute products.An increase in the cost of production inputs.

14.What happens when aggregate demand rises while aggregate supply remains completely inelastic?

Prices rise but output stays the sameOutput rises but prices remain unchangedBoth output and prices increaseBoth output and prices decline

15.In an unregulated market, what typically happens when there is a surplus of demand over supply?

16.Which statement accurately reflects the law of supply?

When the price of calculators goes up, the quantity supplied of calculators falls, assuming all else remains constant.An increase in the price of calculators causes the overall supply of calculators to grow, holding other factors unchanged.When calculator prices increase, the quantity supplied of calculators also rises, assuming other conditions stay the same.A rise in calculator prices leads to an increase in the supply of calculators, keeping all else equal.None of the above statements correctly describe the law of supply.

17.When a drop in income leads to a reduction in coffee demand, coffee is classified as which type of good?

a good with negative income elasticitya good whose demand rises with incomea product used together with anotheran alternative product serving the same purposenone of the above

18.If a reduction in the price of one product leads to a drop in the demand for a different product, what type of goods are these?

19.What is the most likely reason for a decline in the quantity demanded of Pepsi?

Pepsi's marketing efforts have become less impactful than before.The cost of Coca Cola has risen.Consumers of Pepsi have experienced a rise in their income.The price of Pepsi has gone up.

20.Setrite Corporation manufactures chairs. An economist at the company forecasts that if consumers' incomes increase next year, the demand for Setrite's chairs will rise, assuming all other factors remain constant. The accuracy of this forecast depends on whether the chairs are considered which type of good?

possess limited alternative products.classified as normal goods.have a small number of complementary items.are associated with numerous complementary products.are inferior goods.

Supply and Demand – MCQs