DEMAND, ED, UTILITY AND IC (OBJECTIVE QUESTIONS)-CPT Q1.

If a consumer, with a given income and price consumes three commodities x, y and z. his satisfaction will be maximum when:

A.

MU y MU x MU z = = Px Py Pz MU y MU x MU z = = MU y MU z MU x

B.

MU x P MU x = x = MU y Py Px
MU y MU x MU z = = Py Pz Px

C.

D.

Q2.

Point price elasticity of demand is measured by the formula (symbols have the usual meanings).

A.

Q P P Q dQ P dP Q

B.

Q1 Q0 P1 + P0 P1 P0 Q1 + Q0
/P P /Q Q

C. Q3.

D.

Consumer-equilibrium means A. B. C. D. That maximum satisfaction is obtained at minimum sacrifice. That the consumer is in static and unsatisfactory position. That all consumer reach the highest indifference curve. That equilibrium of buyers matches with the equilibrium of sellers.

Q4.

Income elasticity of demand is positive for all person for:A. Normal goods C. Capital goods B. Giffen goods D. Inferior goods

Q5.

The substitution effect of a price change on demand of competitive goods generally is: A. In the same direction C. Zero B. Unity D. In the opposite direction

Q6.

If a demand curve shifts to the right, it means:A. B. C. D. Demand function has improved Price of the commodity has gone down The supply function has improved The real income of the consumer has gone down.

Q7.

The cardinal utility made by Marshal:A. B. C. D. Measures the utilities in precise manner though they are immeasurable Is relative to the level of utilities only Is the basis of the Revealed Preference Curve Is the basis of indifference curve analysis.

Q8.

The indifferences curves show:A. B. C. D. Combinations of two goods at different points about which a consumer is neutral How much a consumer can spend on X plus Y goods Higher order preference-combinations on the upper most segments. More is consumed at lower prices.

Q9.

For a commodity giving large consumers surplus, the demand will be:A. Less elastic C. More elastic B. Unit elastic D. Perfectly elastic

Q10.

When the cross-elasticity of demand between two goods is zero, the goods are:A. Complementary C. Substitutes B. Independent D. Luxuries

Q11.

The responsiveness of demand to a change in price is measured by A. Elasticity of Demand C. The law of Supply B. Equilibrium price D. The law of demand

Q12.

On the maximum level of satisfaction of good X, the marginal utility of good X will be:A. Zero C. Negative B. Positive D. Infinity

Q13.

Which among the following has the least price elasticity of demand? A. Salt C. Tea B. Car D. House

Q14.

When the elasticity of demand is equal to one, then, marginal revenue will be A. Zero C. Negative B. Positive D. Infinity

Q15.

Which of the following statements is true? A. B. C. D. All Giffen goods are inferior goods. All inferior goods are citizen goods Giffen goods have positive income effect and negative substitution effect. Giffen goods have positive substitution.

Q16.

For substitutes, cross-elasticity of demand is A. Positive C. Zero B. Negative D. Infinite

Q17.

When the price-elasticity of demand is unity, the marginal revenue would be A. Equal to zero C. Equal to One B. Less than zero D. Greater than One

Q18. The total area under the demand curve of a good, measures A. Marginal utility C. Consumers surplus B. Total utility D. Producers surplus

Q19.

If the price-consumption curve is horizontal, the price-elasticity of demand for X [the price of which falls] would be A. One C. Less than one B. Zero D. Greater than one

Q20.

If two demand curves intersect, then at the point of intersection A. B. C. D. The flatter curve is more elastic The are equally elastic The steeper curve is more elastic Their elasticity cannot be compared

Q21.

The production function Y=LK is A. Homogeneous of degree B. Homogeneous of degree 1 C. Homogeneous of degree zero D. Non-Homogeneous

Q22.

Given the demand function q=20/p, where p=price of product and q=quality of product, the elasticity of demand at p=10 would, be A. 0 C. -2 B. -1 D.

Q23.

Match List-I with List-II and select the correct answer using the codes give below the list:List-II 1. Right-angled 2. Straight line with negative slope 3. IC is concave to the origin 4. IC is convex to the origin

List-I a. MRSxy=Zero b. MRSxy=Constant but not zero c. Decreasing MRSxy d. Increasing MRSxy Codes: (a) 1 3 (b) 2 4 (c) 4 2 (d) 3 1

A. B. Q24.

C. D.

(a) 1 3

(b) 4 2

(c) 2 4

(d) 3 1

In the market for oranges, a rise in income with other things remaining unchanged, will lead to A. B. C. D. An upward shift of the demand curve A downward shift of the demand curve An upward movement along the demand curve An upward movement along the supply curve

Q25.

The additivity of utility in the Marshallian analysis is based on the assumption of A. B. C. D. Cardinality and independence of utility Constancy of marginal utility of money divisibility Rationality and diminishing marginal utility Consistency and transitivity

Q26.

In the case of an inferior good A. B. C. D. Substitution and income effects are negative Substitution and income effect are positive Positive substitution effect is equal to negative income effect Substitution and income effects are negative

Q27.

In a typical demand schedule, quantity demanded

A. B. C. D. Q28.

Varies inversely with price Varies directly with price Varies proportionately with price Is independent of price

Normally when price per unit of a good falls, its A. B. C. D. Quantity demanded increases Quantity demanded decreases Quantity demanded remains constant None of these happens

Q29.

A fall in the price of a commodity leads to A. B. C. D. A rise in consumers real income A shift in demand A fall in demand A fall in the consumers real income

Q30.

Demand Schedule is shown as A. B. C. D. A function of price alone A result of change in taste A result of increase in the size of the family None of these

Q31.

Market demand for any goods is a function of the A. B. C. D. All of the given below Price per unit of the good Price per unit of the other goods Income of consumers

Q32.

The demand curve for a commodity is generally drawn on the assumption that A. B. C. D. Tastes, income and all other prices remain constant The commodity has no substitutes The average household consists of two persons Purchases of the commodity are made by a free market

Q33.

When the law of demand operates the demand curve A. B. C. D. Slopes downward from left to right Slopes upward from left to right Slopes upward from right to left Parallel to horizontal axis

Q34.

For most consumer apples and oranges are substitute goods. Therefore, we would expect a rise in the price of apples to lead to A. B. C. D. A right ward shift in the demand curve of oranges A fall in the price of oranges A left ward shift in the supply curve of apples A downward changes in the demand curve of oranges

Q35.

Ceteris Paribus clause in the law of Demand does not mean A. B. C. D. The price of the commodity does not change The price of its substitutes does not change The income of the consumer does not change The price of complementary goods does not change

Q36.

Which of the following could provide an example of exceptional demand curves?

1. 2. 3. 4.

Demand for Giffen goods Demand based on fears of a future rise in prices Demand for second-hand clothes Demand for daily newspapers

Select the right answer using the codes given below: A. 1 and 2 C. 2 and 3 Q37. B. 1 only D. 1,2,3 and 4

An exceptional demand curve is one that slopes:A. Upwards to the right C. Upwards to the left B. Downwards to the right D. Horizontally

Q38.

When there is decrease in demand, the demand curve A. B. C. D. Moves downwards towards the axis Remain unchanged Moves upwards away from the axis All of the above

Q39. Two goods have to be consumer simultaneously are A. Complementary C. Substitutes Q40. B. Identical D. None of these

Which of the following pairs of commodities is an example of substitutes A. Mustard oil and coconut oil C. Coffee and mil B. Diamond and cow D. Pen and Ink

Q41.

Match the following 1. Tea and Coffee 2. Domestic consumers and industrial user 3. Sugar and molasses 4. Lipton tea and Brooke Bond tea 5. Car and Petrol

a) Joint demand b) Competitive demand c) Composite demand d) Joint supply e) Competitive supply Codes: (a) 5 5 (b) 1 3 (c) 2 4 (d) 3 1

A. B. Q42.

(e) 4 2

C. D.

(a) 4 3

(b) 1 2

(c) 3 4

(d) 2 1

(e) 5 5

A commodity, the price of which has fallen but is expected to fall further, will present a demand curve A. Regressive at the lower end C. Kinked in the middle B. Regressive at the upper end D. Downward sloping to right

Q43.

When an individuals income falls (while everything else remains the same), his demand for an inferior goods A. Decreases C. Remains unchanged B. Increases

D. We cannot say without additional information Q44. If two goods are complements, this means that a rise in the price of one commodity will induce A. B. C. D. Q45. An upward shift in demand for the other commodity A rise in the price of the other commodity A downward shift in demand for the other commodity No shift in demand for the other commodity

An income demand curve for a Luxury Commodity slopes:A. B. C. D. Upwards from left to right only beyond a certain level of consumers income Horizontally Upward to the right from the origin Vertically

Q46.

An income demand curve for inferior commodity always slopes A. Backwards C. Downwards to the right B. Upwards to the right D. Horizontally

Q47.

Change in quantity demanded refers to A. B. C. D. Movement on the same demand curve Upward shift of the demand curve Downward shift of the demand curve None of these

Q48.

When the price of a substitute of commodity X falls, the demand for XA. Falls B. Rises C. Remains unchanged D. Any of the above

Q49.

If the prices of coffee suddenly shoots up. Ceteris paribus, the demand for tea is expect to B. Remain Unaffected C. Decrease D. Move rightward along the

A. Increase original demand curve Q50.

In the case of Giffen good like bajra, a fall in its price tends toA. B. C. D. Reduce the demand Change demand in an abnormal way Make the demand remain constant Increase the demand

Q51.

Cross demand is the change in the quantity demanded of a given commodity in response to the A. B. C. D. Change in the price of another commodity Change in the Utility of another commodity Change in the nature of another commodity Change in the size of another commodity

Q52.

A normal demand curve slopes down from left to right. This is based on the assumption that:A. B. C. D. there will be a fewer purchases at a higher price than at a lower price Price varies directly with quantity demanded Marginal utility diminishes as price rises Income is fixed and so total expenditure on the commodity is limited.

Q53.

Market demand is A. The sum of all individual demand B. Ability to pay the price asked

C. Demand at prevailing average prices D. Demand in a perfectly free market Q54. When both the price of a substitute and the price of a complement of commodity X rise, the demand for X:A. Rises C. Remains unchanged Q55. B. Falls D. All of the above

Extension and contraction of demand are result of A. Change in price C. Change in Consumers tastes B. Change in consumers income D. None of these

Q56.

Extension of demand means A. B. C. D. More quantity demanded at a lower price More quantity demanded at a higher price More quantity demanded at the same price None of these

Q57.

The elasticity of demand describes:A. B. C. D. The slope of the demand curve The responsiveness of price to changes in the quantity demanded The distinction between changes in demand and change in amount demanded The responsiveness of price to change in the quantity demanded

Q58.

To calculate the elasticity of demand which of the following formula is use A. Proportionate change in price/Proportionate change in price B. Percentage change in demand/Original demand C. (Change in demand/Change in price) (Original demand/Original price) D. Change in demand/Change in price

Q59.

When the demand curve is a rectangular hyperbola, it represents A. Unitary elastic demand C. Perfectly inelastic demand B. Perfectly elastic demand D. Relatively elastic demand

Q60.

If the percentage increase in the quantity of a commodity demanded is smaller than the percentage fall in its price, elasticity of demand is A. <1 C. >1 B. =1 D. Zero

Q61.

If total consumer expenditure on a good fall as its price falls, this indicates that A. e<1 C. Taste for it is declining D. It is being produced under conditions of decreasing cost B. Inferior goods

Q62.

A negative income elasticity of demand for a commodity indicates that as income falls that the amount of the commodity purchases A. Rises B. Falls

C. Remains unchanged Q63. In measuring price-elasticity A. B. C. D. Q64.

D. Any of the above

Price is an independent variable and quantity is a dependent variable. Price is a dependent variable and quantity is an independent variable Price and quantity both are independent variables Price and quantity both are dependent variables

When with a change in price the total outlay on a commodity remains constant, it is a case of A. Unit elasticity C. Perfect inelasticity B. Perfect elasticity D. Zero elasticity

Q65.

Income elasticity demand will be zero when a given change in income bring about A. B. C. D. No change in demand The same proportionate change in demand A less than proportionate change in quantity demanded The same proportionate change in demand

Q66.

Cross elasticity of demand between petrol and automobiles is A. Negative C. High B. Zero D. Infinite

Q67.

One common definition of luxury goods is goods with an income elasticity A. Greater than one C. Less than one but more than zero D. None of these B. Equal to one

Q68.

A straight line, downward-sloping demand curve implies that, as price falls, the elasticity of demand A. Decreases B. Inelastic C. Is zero D. Remains the same

Q69.

In the longer period permitting adjustment, demand is likely to be A. Elastic B. Inelastic C. Unit elastic D. Cannot be known

Q70.

Elasticity of demand is equal to unity while marginal revenue is A. Negative B. Zero C. Positive D. Indeterminate

Q71.

Assume that the demand curve for a certain commodity is a downward sloping straight line. In such case price elasticity of demand A. Decreases as price falls C. Increases as price falls B. Cannot be estimated D. Remains constant at every price

Q72.

If we assume that price decreases and total expenditure increases we may conclude that elasticity of demand is A. Greater than one C. Equal to zero B. Equal to one D. Less than one but more than zero

Q73.

Which of the following does not have a uniform elasticity of demand at all points?

A. B. C. D. Q74.

Rectangular hyperbola demand curve A horizontal demand curve A downward sloping demand curve A vertical demand curve

If the quantity of a commodity demanded remains unchanged as its price changes the coefficient of price elasticity of demand is A. Zero C. Equal to one B. Greater than one D. Less than one

Q75.

Which of the following commodities has the lowest elasticity of demand? A. Black pepper C. Eggs B. Milk D. Car

Q76.

When the income elasticity of demand is greater than unity, the commodity is A. A luxury C. An inferior good B. Necessity D. A non-related good

Q77.

If there were no changes in the quantity of food sold even when its price falls, we would know that A. Demand was entirely inelastic B. Demand was entirely elastic

C. Demand was more elastic than one D. Demand was unit elastic Q78. If as result of a decrease in price total outlay on a commodity increases, its price elasticity of demand is A. Relatively elastic C. Unit elastic Q79. B. Relatively inelastic D. Perfect elastic

Are elasticity gives a better measure of point elasticity of a curvilinear demand curve as A. B. C. D. Both B and C The size of the are becomes smaller The curvature of the demand curve over the are becomes less None of the above

Q80.

If the price elasticity of demand for a commodity is less than unity a decreases in price would result in A. B. C. D. A less than proportionate change in the quantity purchases A more than proportionate change in the quantity purchases An increase in total expenditure on the product A shift in the demand curve

Q81.

A demand curve which is horizontal and parallel to the X-axis representsA. Infinite elastic demand C. Relative elastic demand B. Infinite inelastic demand D. Relative inelastic demand

Q82.

Income elasticity of demand is express as A. Percentage change in quantity demanded/percentage change in income B. Percentage change in income/Change in quantity demanded

C. Change in income/(100 Change in quantity demanded)

D. Change in quantity demanded X (Change in income/100) Q83. Income elasticity of demand will be zero when a given change in income brings about A. B. C. D. Q84. No change in demand A less than proportionate change in quantity demanded A more than proportionate change in quantity demanded The same proportionate change in demand

In the case of an inferior commodity the income-elasticity of demand is A. Negative B. Positive C. Unitary D. Infinity

Q85.

Suppose your income increases by 10% and demand for commodity increases by 10% then the income elasticity of demand is A. Positive B. Negative C. Infinity D. Zero

Q86.

At a point above the middle of a straight line demand curve, elasticity of demand is A. More than one B. <1 C. =1 D. Equal to infinity

Q87.

Pick out the correct formula for are elasticity

A.

Q1 + Q2 P + P2 1 Q2 Q1 P P2 1 Q1 Q2 100 P + P2 1

B.

Q1 + Q2 Q1 + Q2 P1 P2 P1 + P2

C.

D. None of these

Q88.

Two commodities are considered to be perfect substitutes for each other if the elasticity of substitution is A. Infinite C. Zero B. Negative D. Positive

Q89.

Which of the following is the method of measuring elasticity of demand when changes in price of a commodity is substantial? A. Arc method B. Point method C. Percentage method D. None of these

Q90.

In case the two commodities are good substitutes, cross-elasticity will be A. Positive B. Unitary C. Negative D. Infinite

Q91.

In case the two commodities are complements cross-elasticity will be A. Negative B. Positive C. Unitary D. Infinite

Q92.

If more is demanded at the same price or the same quantity is demanded at a higher price, this is know as A. Increase in demand C. Contraction of demand B. Extension of demand D. Decrease in demand

Q93.

Utility may be define as A. The power of a commodity to satisfy wants B. The usefulness of a commodity

C. The level of satisfaction given by a commodity D. The desire for a commodity Q94. The economically relevant range of the total utility curve is the portion over which A. B. C. D. Q95. The total utility is rising at a declining rate The total utility is maximum and constant The total utility is rising at an increasing rate The total utility is declining

After reaching the saturation point, consumption of additional units of the commodity cause A. B. C. D. Total utility to fall and marginal utility to become negative Total utility to fall and marginal utility to increase Total utility and marginal utility both to increase Total utility to become negative and marginal utility to fall

Q96.

Which of the following concepts are most closely associate with Alfred Marshal? A. Marginal utility theory C. Modern theory of wage B. Price mechanism under monopoly D. Interest theory

Q97.

Match List I with List II and select the correct answer using the codes given below the lists:List-I List-II 1. Movement on the same demand curve from left to right 2. Movement on the same demand curve from right to left 3. Shift in the demand curve to the right 4. Shift in the demand curve to the left

a) Expansion in demand b) Contraction in demand c) Increase in demand d) Decrease in demand Codes:(a) A. B. C. D. Q98. (b) 1 1 3 3 (c) 2 2 4 4

(d) 3 4 1 2 4 3 2 1

A given indifference map shows A. B. C. D. A given pattern of tastes and preferences A. given level of satisfaction The average level of satisfaction All of the above

Q99.

A difference curve is convex to the original because of A. B. C. D. The diminishing marginal rate of substitution The law of diminishing marginal utility The principle of utility maximization None of these

Q100.

When MUx/Px>MUy/Py the consumer should buy A. More of x and less of y B. Less of x and more of y

C. More of x and more of y Q101. IC analysis was given by A. Allen & Hicks C. Boulding Q102. IC analysis is based on A. Principal of transitivity C. Constant price Q103. Consumer surplus is A. B. C. D. Q104.

D. Less of x and less of y

B. Marshall D. Sigler

B. Cardinal measurement D. MU of money is constant

Difference between price willing to pay and price actually paid TR-TC Y-c None

Consumer is an equilibirium when A. IC is tangent to price line C. Price falls B. Price is constant D. Price is minimum

Q105.

Higher IC represents A. Higher level of satisfaction C. Consumer equilibrium B. Lower level of satisfaction D. Consumer disequilibrium

Q106.

IC never A. Intersect each other C. A & B B. Convex to point of origin D. Left angled

Q107.

When MSS=MSB A. Net social sacrifice is zero C. TU is zero B. MU=0 D. MUx=Px

Q108. Price effect is the A. B. C. D. Combination of income effect and substitution effect Income effect & negative cross effect A&B None