Question # 1

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

Cross elasticity of Suzuki and Honda cars will be

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Positive

negative

zero

infinite

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

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larger

smaller

zero

unity

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

Mr. Suleri bought 50 litters of petrol when his monthly income was Rs. 25000. Now his monthly income has risen to Rs. 50000 and he purchases 100 litres of petrol. His income elasticity of demand for petrol is

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1

100%

less than one

more than one

Normally a demand curve will have the shape

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horizontal

vertical

downward sloping

upward sloping

This is an assumption of law of demand

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price of the commodity does not change

quantity should not change

supply should not change

income of consumer should not change

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

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

The law demand will not be valid in case of.

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Very high price products

Normal goods

Price effect

Income effects

Haris has a special taste for chicken rolls of college canteen. The owner of the canteen doubles the price of chicken roll. Haris did not respond to the increase in prices and kept on demanding the same quantity of chicken roll. His demand for chicken roll is

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perfectly elastic

perfectly inelastic

elastic

less elastic

Which one is not determinant of demand

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tastes

income

method of production

price

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

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inelastic

unit elastic

elastic

perfectly inelastic

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

If demand is inelastic, a change in the price

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will change the quantity in same direction

will change total revenue in same direction

will change total revenue in the opposite direction

will not change quantity

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

The elasticity of demand of durable goods is

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less than unity

greater than unity

equal to unity

zero

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

Which of the following is a demand function?

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Q + 4P = 20

Q = 35 + 3P

Q - 2P - 15 =0

5P - Q = 4

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

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

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

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

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

The demand of a good falls when.

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Its price falls

Price of the substitute changes

its price rises

It price remain constant

Demand is a function of

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price

quantity

supply

none

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