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Sampurna 2.0 December

Theory of Demand and Supply DPP-2

1. Which of the following is a variable and 6. An exceptional demand curve is one that slopes-
influencing factor in the Law of Demand? (1) upward to the right
(1) Consumer's Income (2) downward to the right
(2) Consumers Tastes and Preferences (3) upward to the left
(3) Price of related goods (4) horizontal
(4) Price of the good
7. Law of Demand fails in case of -
2. The phrase "Other things being equal" in the Law (1) Normal goods
of Demand means- (2) Giffen goods
(1) Income of the consumer remain unchanged (3) Inferior goods
(2) Price of related goods remain unchanged (4) Both (2) and (3)
(3) Tastes and Preferences of consumer remain
unchanged
8. In case of Giffen's Paradox, the slope of the
(4) All the above demand curve is-
(1) Parallel to X-axis
3. The Law of Demand will fail in Case of inferior (2) Positive
goods only if-
(3) Negative
(1) Substitution Effect is greater than Income
(4) Parallel to Y-axis
Effect
(2) Income Effect is greater than Substitution
Effect 9. The demand curve for BAJRA will _______ when
a poor person's income rises.
(3) Both (1) and (2)
(1) shift to the right
(4) Neither nor (2)
(2) shift to the left
(3) be downward sloping
4. The Law of Demand is a ________ statement.
(4) none of the above
(1) Positive
(2) Normative
10. The Law of Demand was propounded by _______
(3) Descriptive
in his book 'Principles of Economics'.
(4) Both (1) and (3)
(1) Lord Keyens
(2) Adam Smith
5. Downward slope of the demand curve shows-
(3) Dr. Alfred Marshall
(1) positive relationship between price and
(4) Ragnar
quantity demanded
(2) inverse relationship between price and
quantity demanded
(3) no relationship between price and quantity
demanded
(4) one of the above
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Answer Key
1. (4) 6. (1)
2. (4) 7. (4)
3. (2) 8. (2)
4. (4) 9. (2)
5. (3) 10. (3)

Hints & Solution
1. (4)
The correct answer is Price of the good.
This is because other things remaining constant
when due to rise in price demand falls and due to
fall in prices demand rises is considered as Law of
Demand. It states the inverse or functional
relationship between price and demand.
Therefore, a variable and influencing factor in the
law of demand is Price of the good.
2. (4)
The correct answer is All the above.
This is because by “Other things being equal” it is
assumed under Law of Demand that Income of the
consumer, Price of related goods and Tastes and
Preferences of consumer are constant.
3. (2)
The correct answer is Income Effect is greater than
Substitution Effect.
For Eg., Giffen Goods, these are those goods which
are highly inferior goods showing a very high
negative effect. As a result when the price of such a
commodity falls there demand also falls. Even when
they happen to be relatively cheaper with other
goods.
This implies when income rises demand decreases
and vice-versa.
4. (4)
The correct answer is Both (1) and (3).
The Law of Demand is a positive statement because
demand will rise if price falls and demand will fall if
price rises, other things being constant.
Law of Demand is a descriptive statement because it
can be tested or verified and it can be true or false.
Therefore, The Law of Demand is a Positive and
Descriptive statement.
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5. (3)
Downward slope of the demand curve shows no
relationship between price and quantity demanded.
6. (1)
The correct answer is upward to the right.
Generally the demand curve is one which is
downward sloping.
Therefore, An exceptional demand curve is one that
slopes upward to the right.
7. (4)
The law of demand states that as the price of a good
increases, the quantity demanded decreases. The
phenomenon of Giffen goods provides a unique
exception to this rule. Giffen goods are those where
an increase in the price leads to an increase in
demand because they are seen as a status symbol
and people tend to buy them for their prestige value.
This means that the law of demand does not apply to
these types of goods, making them quite different
from other consumer items. As we know that all
Giffen goods are inferior goods and therefore it
would be correct to say that the law of demand also
fails in the case of inferior goods too.
Hence, Option 4 - Both (2) and (3)
8. (2)
Giffen's Paradox is an economic phenomenon that
states that when the price of a good increase, its
demand also increases. This contradicts the traditional
law of demand which states that when prices rise,
demand falls. Hence, the slope of Giffen's Paradox is
positive and denotes an inverse relationship between
price and quantity demanded. This means that as prices
increase, the quantity demanded also increases in the
case of Giffen's Paradox.
Therefore, the correct answer is Option 2 - Positive.
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9. (2)
The correct answer is shift to the left.
This is because BAJRA is an inferior good which
means the goods which have an inverse relationship
with the income of the consumer i.e., if the income
of a person rises the demand for inferior goods falls.
This implies that the demand curve of BAJRA will
shift to the left.
Therefore, The demand curve for BAJRA will shift
to the left when a poor person's income rises.
10. (3)
The Law of Demand was propounded by Alfred
Marshall in his book 'Principles of Economics'.
The law of demand states that, all other things being
equal, as the price of a good increases, the quantity
of the good demanded decreases. Conversely, as the
price of a good decreases, the quantity demanded
increases. The law of demand is based on the
assumption that consumers will seek to maximize
their satisfaction (utility) by choosing the most cost-
effective combination of goods and services.
Marshall's formulation of the law of demand helped
establish economics as a distinct field of study, and
his book 'Principles of Economics' was a seminal
work that influenced the development of economics
in the late 19th and early 20th centuries.
Hence, the correct answer is Option 3 - Dr. Alfred
Marshall.

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