Q1:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Meaning

Determine the relation of demand of goods with its price.

A. They are opposite in direction
B. They are parallel in direction
C. The demand increases with its price
D. None of the above is correct
Solution: A
Explanation- The demand of the goods and services increases with the decrease in price. In
other words they move in opposite direction. For instance, if price of A commodity increases
then the demand decreases and if prices of commodity A decreases then the demand for
commodity A increases.
Q2:

Question Type:Fact
Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Methods of measuring elasticity

Lower value of price elasticity reflects ____________

A. Smaller proportion variation in the demand than the proportion variation in its price
B. Larger proportion variation in the demand than the proportion variation in its price
C. Smaller proportion variation in the prices than the proportion variation in demand
D. None
Solution: A
Explanation- Higher numeric value of price elasticity implies that the proportionate variation
in quantity demanded of a good is greater than the proportionate variation in price of that
good. Likewise, lower numeric value of price elasticity implies that the proportionate
variation in quantity demanded of a good is smaller than the proportionate variation in price
of that good.
Q3:
Question Type: Concept
Question Variety: Text Based
Difficulty: Hard
Expected Time to Solve (in seconds):120
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Methods of measuring elasticity

Calculate the elasticity of demand, if the percentage change in quantity demanded is 25% and
the percentage change in price is 5%.
A. 5%
B. 125%
C. 20%
D. 30%
Solution: A
Explanation- The price elasticity of demand is equal to the percentage change in quantity
demanded to the percentage change in price of the product or services. Price elasticity of
demand for the above given information is as follows:

Q4:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Methods of measuring elasticity

What are the methods of measuring elasticity that are suggested by Prof. Marshall?
A. Percentage method
B. Geometric method
C. Both A and B
D. None
Solution: C
Explanation-There is basically two methods used for measuring elasticity namely percentage
method and geometric method. These methods for measuring price elasticity were suggested
by Prof. Marshall.
Q5:
Question Type: Concept
Question Variety: Text Based
Difficulty:Hard
Expected Time to Solve (in seconds):120
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Degree of elasticity

Assertion (A): To determine the absolute change in quantity demanded, slope of the demand
curve is considered.

Reason (R): If the slope of demand curve is flat then price elasticity of the demand is
considered to be highly elastic.

Choose the correct answer from the following code:

A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: A
Explanation- To determine the absolute change in quantity demanded, slope of the demand
curve is considered. If the slope of demand curve is flat then price elasticity of the demand is
considered to be highly elastic because in case of highly elastic demand, percentage change
in quantity demanded is more than the percentage change in price.
Q6:

Question Type: Concept

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Degree of elasticity

In which of the following situation, the change in price does not affect the demand of the
goods and services?
A. Ed >1
B. Ed = ∞
C. Ed =0
D. Ed <1
Solution: C
Explanation: Consumers does not react to the changes in the prices for the product for which
the price elasticity of the demand is zero or it is perfectly inelastic. This means the demand
for the goods and services remains similar if the price elasticity is equal to zero.
Q7:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Meaning

The method of adding two demand curves is called as __________.

A. Vertical summation
B. Horizontal summation
C. Diagonal summation
D. None of the above
Solution: B
Explanation- When two or more demand curves are added horizontally then this summation
of two curves is termed as horizontal summation. Generally horizontal summation is used to
determine the market demand by adding individual demand curves.
Q8:

Question Type: Numerical

Question Variety: Equation Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Methods of measuring elasticity

Determine the percentage change in quantity if the old quantity of demand is 20 and new
quantity of demand is 25.
A. 20%
B. 5%
C. 25%
D. 08%
Solution: C
Explanation- The percentage change in quantity can be calculated as follows:
Q9:

Question Type: Numerical

Question Variety: Equation Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Methods of measuring elasticity

Calculate the percentage change in the market price if the old price of the commodity is
Rs.10 and new price of the commodity is Rs. 13
A. 20%
B. 40%
C. 10%
D. 30%
Solution: D
Explanation- Change in the price percentage can be calculated by dividing the difference of
old and new price by the old price of the goods and services. This is shown below:

Q10:

Question Type: Numerical

Question Variety: Equation Based
Difficulty: Hard
Expected Time to Solve (in seconds):120
Topic: Introductory microeconomics
Concept: Consumer Equilibrium and Demand
Sub Concept: Elasticity of demand
Concept Field: Methods of measuring elasticity

Based on question 8 and question 9 calculate the percentage change in the price elasticity of
demand.
 A. 2.53%
B. 0.58%
C. 0.833%
D. 1.50%
Solution: C
Explanation- The price elasticity of demand is equal to the percentage change in quantity
demanded to the percentage change in price of the product or services. Price elasticity of
demand for the above given information is as follows: