Demand & Supply — Set 1
Economics · मांग और पूर्ति · Questions 1–10 of 50
The Law of Demand states that, other things being equal, as the price of a good increases, its quantity demanded?
Correct Answer: C. Decreases
The correct answer is 'Decreases'. The Law of Demand describes an inverse relationship between price and quantity demanded. When prices rise, consumers generally reduce their consumption of that specific good. This fundamental principle assumes that factors like income and preferences remain unchanged.
What is the shape of a normal demand curve in a graph where price is on the Y-axis and quantity is on the X-axis?
Correct Answer: D. Downward sloping
A typical demand curve slopes downward from left to right. This visual representation confirms the inverse relationship established by the law of demand. The negative slope indicates that lower prices attract a higher volume of purchases.
According to the Law of Supply, a producer will offer more of a product for sale when its price?
Correct Answer: D. Rises
The correct answer is 'Rises'. The Law of Supply establishes a direct relationship between price and quantity supplied. Higher prices provide a greater profit incentive for firms to increase their production levels. This principle assumes that production costs and technology remain constant during the period.
Which term describes a situation where the quantity demanded equals the quantity supplied at a specific price?
Correct Answer: D. Equilibrium
Market equilibrium occurs when the intentions of buyers and sellers perfectly coincide. At this point, there is no inherent pressure for the price to change further. It represents a state of balance where market forces are satisfied.
Goods that are used together, such as cars and petrol, are known as?
Correct Answer: A. Complementary goods
Complementary goods exhibit an inverse cross-price elasticity of demand. If the price of one increases, the demand for its companion good typically falls. These goods are usually consumed as a single unit or package.
If the price of tea rises and people start buying more coffee instead, tea and coffee are considered?
Correct Answer: D. Substitute goods
Substitute goods can be used in place of each other to satisfy the same want. An increase in the price of one leads to an increase in the demand for the other. This relationship is a key driver of consumer choice in competitive markets.
A shift in the demand curve to the right indicates?
Correct Answer: A. An increase in demand
A rightward shift represents an increase in demand at every given price level. This is caused by non-price factors such as a rise in consumer income or a change in tastes. It is distinct from a movement along the same curve caused by price changes.
In economics, a good for which demand increases as the consumer's income rises is called a?
Correct Answer: D. Normal good
Normal goods have a positive income elasticity of demand. As people become wealthier, they tend to purchase more of these high-quality items. Most products encountered in daily life fall into this economic category.
Which of the following is a factor that causes a shift in the supply curve?
Correct Answer: D. Change in price of inputs
The cost of inputs, such as raw materials or labor, directly affects the profitability of production. A decrease in input costs shifts the supply curve to the right, signifying higher supply. Changes in income or taste primarily affect the demand side, not supply.
What happens in a market when the current price is higher than the equilibrium price?
Correct Answer: D. A surplus occurs
When the price is above equilibrium, quantity supplied exceeds quantity demanded, creating a surplus. Sellers may then lower prices to clear the excess stock and attract more buyers. This competition eventually pushes the price back toward the equilibrium level.