DEMAND AND LAW OF DEMAND CF eZ) About the Chapter 4 9 * Meaning of femand: Demand for any commodity tefers to different quantities which a person would be prepared to purchase at different price in a given Period of time, * Features of Demand (i) Demand is an effective desire. The desire for a commodity will be effective only when itis backed by purchasing power and willingness to spend 4i) Demand is always related to quantity, price and time, (ai) Demand for a commodity depends on its utility * Individual Demand end Morket Oemand: Individual demand is the demand of just one consumer, while market demand is the total demand for a product from all its consumers. © Determinants of Demand actors Influencing individual Demand i) Priee of the Commodity (i) Price of related goods (i) Income of the consumer (is) Tastes and preferences (:) Future expectation + Factors Influencing Market Demand (Population (ii) Season and weather iti) Government policy iv) State of business () Distribution of income * Low of emaned: Statement: The law of demand states that other things remaining the same, people will demand lesser ‘quantity of goods at higher price and more quantity of goods at lower prices, 1: Following are the reasons for the ‘operation of law of demand: Law of diminishing marginal utility Income effect Substitution effect New customers Deferent uses of the commodity. Some of the important exceptions to the of demand are as follows: Inferior goods Articles of display Necessities a Future expectations regarding change in price Ignorance on the part of consumers about quality i) Abnormal stations a i) Change in weather conditions i) Loss of faith in quality © Normal ct: A normal good is one whose demand increases with inevease in income. * ‘Inferior Good: An inferior good is one, the demand for which lends to fall with an inerease in the income of the consumer. * bitten Goods: Giffen goods are those goods on which the consumer spends a large part of his income, Their demand falls with fall in their prices. + Substitute Soods: Substitute goods are those goods which can be used in place of each other. 2021.10.31 09:09Seiler» Factors Behind the SH of Deridnd GORE ere nn to msty «main fcim behind the sl oft demand oot = Comoe goods which are J to tose 0 dr wat. + ex ease i Demands as a result of i, ts de price of a product falls and ee ier alled extension in and other rises, it is called. ext demand. tn cons undtastes when demand of the product increases due tp | other factor, it is called increase in demand, end veces aie weal pemond: Quantity = Saee Guamand curve. Such a movement 'S id) along the same fa shange in demand for a product falls as result of rise in ig price, itis known as contraction in demand and whem nen or demand Cuvee ice i he than <* as change in demand once bemels nich ment reflects am Demand for a commodity refers la) Need for the comme m point a to pointe 1) from point a to pointd the commodity deman . i Quay demanded of that eommodi ip cane effesof fall in pric = " ment reflects & {einen effec offal in pri : (a smaller isthe deman larger is th (a) Inger is the demand for i) ragheward shi ubstitute for fruit snacks? td (b) from point ato pointe : q Figure ab ich movement reflects af crease in the price of a complement for fruit snacks? from point a to poi fr (b) from point a to point d "Point 8 to pointe (d) from point a to point¢ WY. tm the figure above which movement reflects how nsumers Would react to an incre 8 fruit snack th (9 from po ¢ in the price of s expected to occur in the furure ” pint a t point b from point 2 t0 point “ © (d) from point a to pointd (b) from point a to point € 42. In the increa goods’ (a) fror (@) fror 43. In the (a) fro (@) fro 44. In th decre (a) Fe (o Fr 15. Leva y I) 10s whic (OR The er we cf @ tne a) @ w“ 18. 18. v. 18 In the figure above, which movement reflects an increase in income if fruit snacks are an inferior goods? a) from point a to point d_ () from point a to point ¢ {from point a to point b (a) from point ato point e In the figure above, which movement reflects an increase in income if fruit snacks are a normal goods? {a) from point a to point d (4) from point ato {@ from point a to point b In the figure above, decrease in population? (4) From point ¢ to point c (0 From point at Which of the fol tary goods? (@) from point a to Which movement reflects a () From point ¢ to point b () Proms point ato poine © point a to point lowing is an example of complemen (a) Tea and Coffee b) Cok d) Non and Pepsi (@) Rice and Wheat The demand fo: increase in income (a) Increases (b) Decreases fo Remains same Wd Either increase Increase in price of substitute e (@) Expansion in Demand (b) Increase in Deman¢ (Decrease in Demand (@ Contraction in Demand A, Band C are three commodities, where complementary; whereas A and C are increase in price of commodity (a) Demand of all the co (&) Demand of commodities A and B will fall, whereas demand of C will rise (@ Demand of commoditi demand of B will rise (@) Demand of commodities B demand of A will modities A, B and C will f ies A and G will fall, whereas C will fall, whereas emanded simultane When two or more goods are demanded ously, itis known as: {4) Joint Demand (Direct Demand There will be a ae ‘ars with an increase in the price of Pee {Daighoward shit) Upward Movemens (0 Leftward shift (a) Downward Mo b) Alternate Demand (a) Composite Demand in the demand curve of a1. 23. 26. 25. 28. DEMAND AND LAW OF DEMAND | 3. ‘The demand curve for a commodity is generally drawn ‘on the assumption that (a) Price of substitute goods does not change (b) Taste and preferences of the consumer remain the same (@ Income of the consumer remains the same (@ All of these Which one of these is not an example of substitute goods? (a) Tea and Coffee (© Ink Pen and Ball Pen Law of demand states the __ relationship ween price and quantity demanded. (b) Posi (a) None of these (b) Coke and Pepsi (@) Bread and Butter ( Proportional Expansion in demand leads to: a) Rightward shift in demand curve 1) Downward movement along the demand curve ard movement along the demand curve Which one of these is a determinant of individual 4) Size and composition of population a Weather m the given demand schedule, determinant of z 20 20 100 7 ard shift in demand curve ) Leftward shift in demand curve ward movernent along the demand curve wement along the demand curve id) Downward 1 nd occurs due to: Expansion in dem i) Rise in price of the given commodity h) Fall in price of the given commodity in price of substitute goods {) Fal in price of complementary goods There is a sudden change in climatic conditions resulting in hot weather. Assuming no change in the price of the cold drinks. It wll lead to: G) Upward movement along the same market demand th Downward movement along the same market demand curve {) Rightward shift in the market demand curve UW) Leftward shift in the market demand curve Leys Ae4 VATSAL 196 QUE HON the damn cueve fo sort drinks Is aon sche 9 we 20, not (sem iemiier pret ta batenslon of demand en the same price or game quantity his hind of dena ts know a ts the relationship 31, Cross demand sta on (ty Demand of given commodity and Income of the commodity and taste and Nowe of these 82, Which ofthe folowing Is not as ssn (0) ncome ofthe consumers remain same affects the demans ood B then: i) Ava subattte of goods B tb) Aisa complement of goods B (€) Both) and ts) (a) Either) or In atypical demand sche Varies directly with price on . i Which of the fo lowing is a demand’ (b) Season and ‘ (opaceorraan Wale Which ofthe shift in the deman foods abore ving Factors wil J id eurver Increase in incon ad 10 a lefty b) Increase in ineo aan (4) Expectation of fut ine Tease in price BANK of ECONOMICS Claws XH 7. Decrense in the price of the complemen (o) Rightwvard shift inthe demand curve (d) Leftward shift in the demand curve 38, If the price of goods "rise and it leads tp a demand for goods then the two goods args li 4) Substitute good: (b) Complementary goody (¢) Normal good 1) Inferior goods 39, Market demand, curve is obtained by uummation vidual demand eur (a) Vertical b) Horizontal id) Neither (a) nor (by 1) Other factors being constant 41. An inerea: al income of a consumer induces him to buy more of @ commodity whose price has been (a) Inducement Effect Substitution Effect (c) Income Ef (4) Utility Effect 42. Expansion of Dema ‘ciated with n quantity demanded () Fallin price, Fallin quantity demanded Fall in price, Rise in quantity demanded !) Rise in price, Fall in quantity demanded WX and ‘omplementary goods, then with and demand of ¥ will of X will increas and of ¥ will and di ©) Demand of X and ¥ will increase ) Demand of X and ¥ will de If Tea and coffee tea leads to, 44, a fall in the price of (i) Rise in the demand for t (W) Fallin the demand of te (W) Fallin the demand for coffee (W) Rise in the demand of coffee Bo (i) and (iv) (Both (and (©) Both Gi) and (it) (Both (a) and 2021.10.31 09:09, re "7 48. 46. ree Alle prod GT oM oP oP wit kno} ws om wL (ans Ag Ind Gh wn oD wt Exp @¢ )¢ @c a) Ira Yri (a) S o) lew Xn alte ws fe) The5 hin bee » vit yd pit 47. 48. 49. 51, aie thie avicges Seal nee ae drawing an individual demand curve for a product which one is it? a) Taste and preference of the individual (b) Monetary income (©) Price of the given product (d) Price of related goods With fall in price of commodity, demand of the commodity increases as it becomes relatively cheaper in comparison to other commodities. ‘This effect is known as: (@) Substitution Effect (b) Income Effect (©) Law of Demand (Law of DiminishingReturns A goods can be considered as a normal goods in an increase in income of the consumer causes In demand of the given good. () Increase (b) No change (© Decrease (@ Less than proportionate increase Expansion and contraction in demand are caused by @) Change in price of the given goods (6) Change in income (© Change in price of related goods (@) Change in population fue to fall in the pr ¥ rises then the two alternative) sods X, deman yods are: (C (a) Substitutes b) Complements © Not related (d) Competitive IF with the rise in price of goods ¥, deman¢ for goods X rises then the two goods are: (choose the correct alternative) (a) Substitutes {b) Complements © Not related (@ Jointly demanded The demand curve of a good shift from DD'to dd Yeo 4 Deana (ons) 2} DEMAND AND LAW OFDEMAND | 5 ‘This shift can be caused by (Choose the native) (a) fll in the price of the goods (b) rise in the price of the goods (6) rise in the price of substitute goods (@) rise in the price of complementary goods 52. An increase in the price of tea will have the following effect on the demand curve of tea: @y by eres. = er 3 5 i Bp, Hy . é ol Q OQ; A o aa = Demand of Tea Unis) Demandof Tea (Unis) a a 4 Demandof Tea (Units) ‘Demand f Tea (i Uns) 53. ‘The following movement in the demand curve is because of: Demand Inctease in price of given commodity Decrease in price of given commodity (©) Increase in price of substitute goods (a) Deere 54. What doe: se in price of complementary goods the following diagram represent? Prise of Tea in t) 2 2021.10.31 09:10Pe ity demanded ange asm tavot and) (peer) 00 55, Which of the following | 3 WDD, (b) Dap 56. Which of the situation of Expans ST, Quan demands ofa good ona given price ann (8) Quanity oF Good Demand fora Goods i) Mares M8 hoe sod whic joi saya wan (8 Join Goods 1 Subsite Go Complementary Goods (d) None of « oe 89. Those goods Which are used in pl, as Complementary Goods) 5 () Any of these represents market demand g Clase XT ‘Those goods whose demand falls another, are known as: fa) Substiture Goods () Giffen Goods (2) Public Goods Other things being equal, inverse relation price and demand is known as ww of Diminishing Marginal Utility () Superior Goods (b) Law of Supply c) Law of Demand ofthese 62 Dem: (d) Parallel to Yaris 63, D fen goods would be zt b) Parallel to Xai : ) Parallel to Yaxis eh Wika a ing goods is an exanple of Bread and Bu 4) None of these 65. Wh he fol is ary goods? 66, With a fallin prc mand for ¥ also falls wh i “ b) Substitute Goods inferior Good: erior Goods 67) App one ples of which pe ») Abnormal Goods b) Normal Goods ) Substitute C (d) Complementary Goods 68. When income falls, demand for super (a) Ris 88. Other things being equal, with a change in price wie mand changes, it is known as a) Extension/Contraction in demand tb) Inctease/Decrease in demand lo) Any of these 'd) None of these 70. When price of X falls and demand for it alo ‘what type of goods is it 's) Complementary Goods (b) Substitute Goods {© Inferior Goods (q) Superior Goods ith fli eg 71. Whie wD fc 72. law (Pre (No 73. Other dema (a) Co (6) Ine 74. With @) Ine (Api What 79, (a) Mary iden b) Giff ) With @ With as de 2021.10!31 09:ds? Gost ene 71. Which ofthe following is a demand function? 80. (D={) 5 =F) (C= (@ None of these 72. Lav of demand applied upon which of following? (a) Prestigious Goods (o) Normal Goods (6) Inferior Goods ey (d Allof these 7. Other things being equal, with a fal in pric demand is known as (a) Contraction in demand (©) Increase in demand 82 (by Extension in demand (di Decrease in demand 74, With the rise in income, when demand for a goods gg increases, it is known as: fa) Increase in demand —_(h) Extension in demand i) Appreciation in demand (d) None 75. What shows the following tab) Price Demand (Units) 0 0 84. 0 0 a) Increase in dem: b) Decrease in demar a «) Extension in der id) Contraction in de 76. What is shown in 86 Price Demand (Units) (@) Contraction in 77. For a cup of tea, dema le sugar ani milk is known as: 78. With a rise in price of coffee, demand for tea A (a) Rise (ty Falls © No effect (a) None 78. Which of following statements is fal Curve and Demand Cune have identical shape 6) Giffen goods have positive effect (©) With a fallin rice, when demand rises, itis known (@) With rise in price when demand fll, iis as decrease in demand DEMAND AND LAW OF DEMAND ‘With a fallin price, when demand rises, demand curve would have (a) Negative slope (6) Zero slope (@) Positive slope (@ None Which of following are related goods? @) Complementary Goods (by Substitute goods (@) Both of these (d) None of these Demand and price for a normal goods have, which type of correlation isi (a) Positive () Negative (0) Zero (di None of these Which of following is not a reason for an increase in demand: (a) Increase of Income (b) Increase in Price of Substitution (o) Increase in Price of Complementary Goods (a) Not With a fallin price of X, demand for ¥ increases, what «) Complement ) Substrates pose there umers: A,B (Quantity demand f ei Which of the following st sis in 2) Demand for a commodity may incre reas WM mand is flatter than individual Jemand curve 1) In case of normal goods, income demand curve lopes upwards Read the following demand schedule Price (2) ‘Quantity Demand (Units) 100 ‘ 140 Assuming 100 units as the initial demand, the effect on the demand curve will be a) Rightward shife ) Leftward shift ) Upward mo rent along the demand curve ) Downward movement along the curvei — foward shite 8. Which fe fllowing ators an cause leeward shi of demand cure? (Dincrese in income ofthe buy oy rem in income of he buyer «normal goods (6 tncrease in population (Expectation of fire rein pce : Whar be the ss pri et of ubsiate gos yers of an inferior 20. (Positive b) Negative (Zee Note of these St, day satement abt demand fora goods isconsidered complete only when the fallowing is / are mentioned init (cose the correct alternate) (Price ofthe goods (8) Quantity ofthe goods (Peri of ime 2) Al of chase 92 Price Demand (Units) 0 intial demand) (Increase in demand ase in 83, The quantity demande Glthe amount of a goods that consumers plan to Purchase ata particular price tblindependent of the price of the goods independent of consumes’ buying plan (@always equal 10 the equiibrium quanti 94, Iftwo goods ar BIE cross rice ca 1 cross. price elasticity ‘demand will bene will lemand will b the price of one goo (c) the cross-price elasticity of de ‘si po demand ‘A new study has show healthy. The demand fo 95, that avocados are extremel avecadoe has increased due | \VATSAL ISC QUESTION BANK of ECONOMICS CI xi to a change in: (@) market size (b) price of a substitute goods (c) price of a complementary goods (@) tastes and preferences A decrease in demand for ‘caused by a (a) increase in price for Samsung Galaxy (b) increase in population in India (© the price for iPhones is expected to intease ny iPhones in Tada. cou jg 4) the price of iPhone apps increased Thotsands of people leave a small town due tp factory closing dovn. Sales at the local grocery sam become slow. What causes this change? (a) Prices or availability of substitutes vailability of complementary goods (@ Change in the weather or season ) Prices o pulation (Change in the number of buyers) The price of movie tickets in a town has risen from 500 to % 600. What is the most likely effec of he 2) The demand cureformovieekets willmeve ga —_| 0) The quanity demanded for movie kes wa (0) The demand curve for movie tickets will move left | 4)The quantity demand for movie tickeis Wil deere If the price of rice of printers goes down, what happens | the market for ink cartridges (2) Supply increases (Supply decreases | (©) Demand increases _(@) Demand decreases | IF Mary use buy 10 unite a4 each and now 15 unis when the price io ® 3, het | 1) qvamity demanded has dered (@) supply has decreased" FF fe a. we se cult, 88 hey Ue tg, ey sop ods ers) N from Ct of the ove righ cets wi) rove let ets wil pens it ses eases sow buy 33 60 7.) 8) 9 (@ 10. @) M1. @) 12. 13. (@) 14, (@) 15. (a) 16. (@) 17. (b) 18. (0) 19, (@) 20. (c) 21. @) 22. ) 23. (a) 24. (b) 28, (A) 26. (b) 27. tb) 28.) 29, (@) 30. (0) 31 (@) 32. @) 33.) 34. 35, 36, (2) 37. (©) 38. () 39, (b) 40. (a) AL (6) 42, ©) 43. (4) 44, ) 45. Oo) = DEMAND AND LAW OF DEMAND | 9 [1] EERE 51. (@) 52, @) 53. (a) 54, (0) 55. Ob) 55, (a) 57, (©) 58 (a) 59, (t) 60, fa) 61. () 62. (@) 63. (c) 64. @) 65. (A) 65. (b) 67. () 68. (a) 69. @ 70, © 71. (a) 72. (©) 73, (bo) 74. (75. (a) 76. (0) 77. (0) 78 (a) 79, @ 80. (@) 81. (©) 82. ) 83. () 84, (a) 85. (a) 86. (a) 87. © 88 (@) 89. @ 90, (a) 91. @) 92. @) 93. (a) 94. (@) 95, 96. (a) 97. (@) 98 Gd) 99. (cl) 100. fa) EER) 4. Demand refers to the quantity demanded of a commodity ata particular price during a given period of time 2. Demand curve is downward sloping because of inverse relation between price and demand and the factors given above are responsible for the inverse relation betw the two 3. It's a statement of aw of demand, 4. When demand increases due to some favourable changes taking place in factors affecting demand other than price, demand curve shifts to the righ 5. Increase of demand shows curve. 6. Decrease in demand shows leftward shift of the demand 7. Upward movement on the same demand curve shows decrease in quantity demanded dve to increase in price ightward shiftof the demand 8. Asthe price of frut snack increases, the demand for non fruit snack will increase as it becomes comparatively cheaper. 9. AS price of the substitute increases, demand for the commodity also increases. es 10. Ih case of complementary goods with increase inthe price ‘ofa complementary goods the demand forthe commodity decreases, lf there is increase in the price of a commodity in future then the demand for that commodity at present will In case of inferior goods with increase inincome demand for inferior goods decreases, Income and normal goods are directly related to each ‘ther Higher income higher demand, With decrease in population keeping all other things constant demand decreases, These areal substitute goods Direct relation between income and demand Commodity in question becomes comparatively cheaper and demand increases, Itis because of their nature of goods, Itis @ demand for complementary goods, Demand for cars decreases as they complement each other. V0ya SOREL ale)