Demand & Supply — Set 2
Economics · मांग और पूर्ति · Questions 11–20 of 50
What does a vertical demand curve represent regarding the price elasticity of demand?
Correct Answer: A. Perfectly inelastic demand
Perfectly inelastic demand means that the quantity demanded remains constant regardless of price changes. This is common for life-saving medicines or absolute necessities with no substitutes. In such cases, the elasticity coefficient is equal to zero.
If the quantity demanded of a good is very sensitive to price changes, the demand is said to be?
Correct Answer: A. Elastic
Elastic demand occurs when a small percentage change in price leads to a large percentage change in quantity demanded. This usually applies to luxury items or goods with many close substitutes. Consumers easily switch to alternatives when the price of such goods rises.
The term 'Ceteris Paribus' used in demand and supply laws means?
Correct Answer: A. Other things remaining the same
Ceteris Paribus is a Latin phrase essential for isolating the effect of one variable on another. In economics, it is used to hold non-price factors constant while studying price-quantity relationships. It helps in formulating clear theoretical models of market behavior.
In a market, a 'Shortage' occurs when?
Correct Answer: C. Demand is greater than supply
A shortage arises when the quantity demanded exceeds the quantity supplied at the prevailing price. This typically happens when the market price is set below the equilibrium point. Shortages often lead to upward pressure on prices as buyers compete for limited goods.
Which of the following would lead to an increase in the supply of a commodity?
Correct Answer: D. Improvements in technology
The correct answer is 'Improvements in technology'. Technological progress reduces the cost of production and increases efficiency. This allows producers to supply more of the commodity at the same price, shifting the supply curve rightward. Tax increases or higher labor costs would instead decrease supply by making production more expensive.
Goods for which demand decreases as income increases are known as?
Correct Answer: C. Inferior goods
Inferior goods have a negative income elasticity. As consumers' incomes rise, they switch to better alternatives, reducing their consumption of these cheaper goods. Coarse cereals or public transport are often cited as examples of inferior goods.
The point where the supply curve and demand curve intersect is called?
Correct Answer: A. Equilibrium point
The intersection point represents the market price where quantity demanded equals quantity supplied. At this equilibrium, the market clears, and there are no unsatisfied buyers or sellers. It is the fundamental goal of market adjustments in microeconomics.
When total revenue remains unchanged despite a change in price, the elasticity of demand is?
Correct Answer: B. Equal to one
The correct answer is 'Equal to one'. This condition is known as unitary elastic demand. In this case, the percentage change in quantity exactly offsets the percentage change in price. As a result, the total expenditure by consumers remains the same.
The responsiveness of quantity demanded to a change in the price of another related good is called?
Correct Answer: C. Cross elasticity
Cross elasticity measures the strength of the relationship between substitutes or complements. A positive value indicates substitutes, while a negative value indicates complements. It helps businesses understand how competitors' pricing affects their own sales.
Which of the following will cause a movement along the demand curve rather than a shift?
Correct Answer: B. Change in the price of the good itself
A change in the good's own price causes a change in 'quantity demanded,' which is a movement along the curve. All other factors, like income or population, cause a change in 'demand,' resulting in a shift of the entire curve. This distinction is vital for accurate graphical analysis.