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

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

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necessity

luxury

substitute

not available

Normally a demand curve will have the shape

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horizontal

vertical

downward sloping

upward sloping

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

Income elasticity of demand for normal good is always

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1

more than one

negative

positive

The law of demand will not be apply in case of

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Inferior goods

Superior goods

Normal goods

Non of them

The law demand will not be valid in case of.

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Very high price products

Normal goods

Price effect

Income effects

Price and demand are positively correlated in case of

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necessities

comforts

Giffen goods

Luxuries

The demand curve is negatively sloped due to

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Income effect

Substitution effect

Price effect

All the three

A horizontal demand curve has a price elasticity of

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zero

infinity

1

variable

Cross elasticity of Suzuki and Honda cars will be

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Positive

negative

zero

infinite

Market demand curve is a summation of all individual demand curves as

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Vertical

horizontal

mathematical

local

The elasticity of demand of durable goods is

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less than unity

greater than unity

equal to unity

zero

Price of a product falls by 10% and its demand rises by 30%. The elasticity of demand is

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10%

30%

3

1/3

If demand is unitary elastic, a 25% increase in price will result in

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25% change in total revenue

no change in quantity demanded

1% decrease in quantity demanded

25% decrease in quantity demanded

The demand of a will expand when:

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Other things do not remain constant.

Price of the products changes.

Value of money falls.

None of the three

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

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positive

negative

constant

greater than one

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

Price elastic of demand measures

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change in price caused by changes in demand

the rate of change of sales

the responsiveness of demand to price changes

the value of sales at a given price

Demand is a function of

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price

quantity

supply

none

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