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All questions of Theory of Demand and Supply for CA Foundation Exam
If a 20% fall in price of a commodity brings about a 40% increase in its demand, then the demand for the commodity will be termed as:
- a)Inelastic
- b)Highly elastic
- c)Elastic
- d)Perfectly elastic.
Correct answer is option 'B'. Can you explain this answer?
If a 20% fall in price of a commodity brings about a 40% increase in its demand, then the demand for the commodity will be termed as:
a)
Inelastic
b)
Highly elastic
c)
Elastic
d)
Perfectly elastic.
|
Arnab Nambiar answered |
If percentage change in price a of commodity is more than percentage change in quantity demanded then it is known as "ELASTIC DEMAND"
Can you explain the answer of this question below:The Price of a tiffin box is Rs. 100 per unit andthe quantity demanded in a market is 1,25,000units . Company increased the price to Rs.125per unit due to this increase in price quantitydemanded decreases to 1,00,000 units. whatwill be price elasticity of demand ______A:1.25B:1.00C:0.80D:None of the above.The answer is c.
|
Samiksha answered |
Well lets solve this step by step..... Given:- Q=125000 units, Q1=100000 units, change in quantity= - 25000 units, now %change in quantity demand = change in quantity /Q * 100= - 20% .. Now P=Rs 100, P1=Rs 125, change in price=Rs 25, %change in price = change in price/P * 100= 25%... nw price elasticity of demand = %change in quantity demanded /%change in price =-20%/25%=(-)0.8... i think 0.8 will be the answer plz check it once more...
If the price of any complement goods rises:- a)Demand curve shifts to left
- b)Demand cure shifts to right
- c)Demand curve moves downwards
- d)Demand curve moves upward
Correct answer is 'A'. Can you explain this answer?
If the price of any complement goods rises:
a)
Demand curve shifts to left
b)
Demand cure shifts to right
c)
Demand curve moves downwards
d)
Demand curve moves upward
|
|
Sahil Malik answered |
Complementary goods are those goods which consume together. for example-car and petrol....when price of car increase then demand of petrol and car decreases because petrol is neccesary to drive a car and when price of car increases then people do not buy car and due to this reason petrol is also not in demand...so demand curve shifts to left....and remember complimentary goods are joint goods
In expansion and contraction of demand ______
- a)Demand curve remains unchanged
- b)Demand curve changes
- c)Slope of the demand curve changes
- d)Both (a) & (c) above
Correct answer is option 'D'. Can you explain this answer?
In expansion and contraction of demand ______
a)
Demand curve remains unchanged
b)
Demand curve changes
c)
Slope of the demand curve changes
d)
Both (a) & (c) above
|
Alok Mehta answered |
In the expansion and contraction of demand, the demand curve remains unchanged, but the quantity demanded changes along the same demand curve. This is because the change in quantity demanded is due to a change in the price of the product, while other factors affecting demand remain constant. So, statement 1 (Demand curve remains unchanged) is correct.
The slope of the demand curve also changes when there is an expansion or contraction of demand. This is because the slope represents the responsiveness of quantity demanded to changes in price. When there is an expansion or contraction of demand, the slope will become more or less steep, depending on whether demand is more or less responsive to price changes. So, statement 3 (Slope of the demand curve changes) is correct.
The slope of the demand curve also changes when there is an expansion or contraction of demand. This is because the slope represents the responsiveness of quantity demanded to changes in price. When there is an expansion or contraction of demand, the slope will become more or less steep, depending on whether demand is more or less responsive to price changes. So, statement 3 (Slope of the demand curve changes) is correct.
The price of mangoes increases form Rs. 30 per kilogram to Rs. 40 per kilogram and the supply increases from 240 kilograms the 300 kilograms. What will be the elasticity of supply for mangoes?
- a)-0.67
- b)0.67
- c)– 0.77
- d)0.75
Correct answer is option 'D'. Can you explain this answer?
The price of mangoes increases form Rs. 30 per kilogram to Rs. 40 per kilogram and the supply increases from 240 kilograms the 300 kilograms. What will be the elasticity of supply for mangoes?
a)
-0.67
b)
0.67
c)
– 0.77
d)
0.75
|
Lakshmi Kaur answered |
0.5
d)2.0
Solution:
Change in price = Rs. 40 - Rs. 30 = Rs. 10
Change in quantity supplied = 300 kg - 240 kg = 60 kg
Using the formula for price elasticity of supply:
Elasticity of supply = (Percentage change in quantity supplied) / (Percentage change in price)
Percentage change in quantity supplied = (Change in quantity supplied / Initial quantity supplied) x 100%
= (60/240) x 100%
= 25%
Percentage change in price = (Change in price / Initial price) x 100%
= (10/30) x 100%
= 33.33%
Therefore, elasticity of supply = (25/33.33)
= 0.75
The closest option to 0.75 is option (b) 0.67. However, none of the given options match the calculated value exactly.
d)2.0
Solution:
Change in price = Rs. 40 - Rs. 30 = Rs. 10
Change in quantity supplied = 300 kg - 240 kg = 60 kg
Using the formula for price elasticity of supply:
Elasticity of supply = (Percentage change in quantity supplied) / (Percentage change in price)
Percentage change in quantity supplied = (Change in quantity supplied / Initial quantity supplied) x 100%
= (60/240) x 100%
= 25%
Percentage change in price = (Change in price / Initial price) x 100%
= (10/30) x 100%
= 33.33%
Therefore, elasticity of supply = (25/33.33)
= 0.75
The closest option to 0.75 is option (b) 0.67. However, none of the given options match the calculated value exactly.
When price falls from Rs. 6 to Rs. 4, the demand rises form 10 to 15 units. Calculate price elasticity of demand. (Point elasticity)- a)1.5
- b)3.5
- c)0.5
- d)2
Correct answer is option 'A'. Can you explain this answer?
When price falls from Rs. 6 to Rs. 4, the demand rises form 10 to 15 units. Calculate price elasticity of demand. (Point elasticity)
a)
1.5
b)
3.5
c)
0.5
d)
2
|
Somnath Khaneja answered |
Price elasticity = (change in quantity demanded ÷change in price )×(initial price÷ initial demand) (5÷2)×(6÷10) that's (2.5×0.6) gives 1.5
The price of a commodity decreases from 10 to 8 and the quantity demanded of it increases from 25 to 30 units, then the coefficient of price elasticity will be______.- a)1.00
- b)-1.00
- c)1.5
- d)-1.5
Correct answer is option 'B'. Can you explain this answer?
The price of a commodity decreases from 10 to 8 and the quantity demanded of it increases from 25 to 30 units, then the coefficient of price elasticity will be______.
a)
1.00
b)
-1.00
c)
1.5
d)
-1.5
|
|
Mehul Ghoshal answered |
Solution:
Price elasticity of demand is the measure of the responsiveness of the quantity demanded of a good to a change in its price.
Given, the initial price of the commodity = $10
Final price of the commodity = $8
Initial quantity demanded of the commodity = 25 units
Final quantity demanded of the commodity = 30 units
We can use the formula for price elasticity of demand to calculate it:
Price elasticity of demand = % change in quantity demanded / % change in price
Calculating the % change in price:
% change in price = (final price - initial price) / (initial price) x 100
% change in price = (8-10) / 10 x 100
% change in price = -20%
Calculating the % change in quantity demanded:
% change in quantity demanded = (final quantity demanded - initial quantity demanded) / (initial quantity demanded) x 100
% change in quantity demanded = (30-25) / 25 x 100
% change in quantity demanded = 20%
Substituting the values in the formula:
Price elasticity of demand = % change in quantity demanded / % change in price
Price elasticity of demand = 20% / -20%
Price elasticity of demand = -1
Therefore, the coefficient of price elasticity of demand for this commodity is -1.00, which indicates that the commodity is price elastic.
Price elasticity of demand is the measure of the responsiveness of the quantity demanded of a good to a change in its price.
Given, the initial price of the commodity = $10
Final price of the commodity = $8
Initial quantity demanded of the commodity = 25 units
Final quantity demanded of the commodity = 30 units
We can use the formula for price elasticity of demand to calculate it:
Price elasticity of demand = % change in quantity demanded / % change in price
Calculating the % change in price:
% change in price = (final price - initial price) / (initial price) x 100
% change in price = (8-10) / 10 x 100
% change in price = -20%
Calculating the % change in quantity demanded:
% change in quantity demanded = (final quantity demanded - initial quantity demanded) / (initial quantity demanded) x 100
% change in quantity demanded = (30-25) / 25 x 100
% change in quantity demanded = 20%
Substituting the values in the formula:
Price elasticity of demand = % change in quantity demanded / % change in price
Price elasticity of demand = 20% / -20%
Price elasticity of demand = -1
Therefore, the coefficient of price elasticity of demand for this commodity is -1.00, which indicates that the commodity is price elastic.
Expansion & contraction of Demand curve occurs due to - a)Change in the price of commodity
- b)Change in price of substitute or complementary goods
- c)Change in income
- d)None
Correct answer is 'A'. Can you explain this answer?
Expansion & contraction of Demand curve occurs due to
a)
Change in the price of commodity
b)
Change in price of substitute or complementary goods
c)
Change in income
d)
None
|
Rajat Patel answered |
When as a result of decrease in price, the quantity demanded increases, in economics we say that there is an expansion of demand and when as a result of increase in price, quantity demanded decreases we say that there is a contraction of demand. Hence, we can conclude that expansion contraction of demand curve occurs due to change in price of a commodity.
If the number of customers in the market increases suddenly, the supply will:a) Decreaseb) Increase c) Not be affected d) Depend on the number of customers.Correct answer is option 'C'. Can you explain this answer?
|
Poonam Reddy answered |
In a very short period, supply is fixed as suppliers cannot increase the supply of a commodity. Since, in a very short period price is determined by demand only (supply being constant), thus the price that prevails in the very short period is called market price. Hence if the number of customers in the market increases suddenly, the supply will not be affected.
In case of straight line demand curve meeting two axis, the price elasticity of demand at the point where the curve meets Y-axis would be _______- a)Zero.
- b)Greater than one
- c)Less than one
- d)Infinity
Correct answer is option 'D'. Can you explain this answer?
In case of straight line demand curve meeting two axis, the price elasticity of demand at the point where the curve meets Y-axis would be _______
a)
Zero.
b)
Greater than one
c)
Less than one
d)
Infinity
|
Jayant Mishra answered |
The slope of a straight-line demand curve, one with a constant slope, has constantly changing elasticity. ... No two points on a straight-line demand curve have the same elasticity. The price elasticity of demand is different at each point on a demand curve with constant slope.
Demand of i-pod increases from 950 to 980 and income increases from 9,000 to 9,800 . What is income elasticity?- a)0.53
- b)0.35
- c)0.43
- d)None
Correct answer is option 'B'. Can you explain this answer?
Demand of i-pod increases from 950 to 980 and income increases from 9,000 to 9,800 . What is income elasticity?
a)
0.53
b)
0.35
c)
0.43
d)
None
|
|
Rajeev Chaudhary answered |
Q1 = 950, Q2 = 980
⇒ ∆Q = 30
M1 = 9000, M2 = 9800
⇒ ∆M = 800
Can you explain the answer of this question below: The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)- A:0.66
- B:0.33
- C:1.00
- D:1.5
The answer is a.
The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)
A:
0.66
B:
0.33
C:
1.00
D:
1.5
|
|
Divya answered |
Just use the formula of point elasticity. U will easily find the answer
From which of the following, the concept of consumer’s surplus has been derived?- a)Law of demand
- b)Indifference curve analysis
- c)Law of supply
- d)none
Correct answer is 'A'. Can you explain this answer?
From which of the following, the concept of consumer’s surplus has been derived?
a)
Law of demand
b)
Indifference curve analysis
c)
Law of supply
d)
none
|
|
Harshad Kapoor answered |
Because consumer surplus is the difference between what consumer is ready to pay and what he actually pays
What will be the price elasticity it original price is Rs. 5, original quantity is 8 units and changed price is Rs. 6, changed quantity is 4 units:
- a)2.5
- b)2.0
- c)1.5
- d)1.0
Correct answer is option 'A'. Can you explain this answer?
What will be the price elasticity it original price is Rs. 5, original quantity is 8 units and changed price is Rs. 6, changed quantity is 4 units:
a)
2.5
b)
2.0
c)
1.5
d)
1.0
|
Prashanth Datta answered |
Calculation of Price Elasticity:
Price elasticity is calculated with the formula:
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
Percentage Change in Quantity Demanded:
Quantity demanded has decreased from 8 units to 4 units.
Percentage Change in Quantity Demanded = ((New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded) x 100
= ((4-8)/8) x 100
= -50%
Percentage Change in Price:
Price has increased from Rs. 5 to Rs. 6.
Percentage Change in Price = ((New Price - Old Price) / Old Price) x 100
= ((6-5)/5) x 100
= 20%
Price Elasticity of Demand:
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
= (-50%) / (20%)
= -2.5
Interpretation of Price Elasticity:
As the price elasticity of demand is greater than 1, the demand for the product is elastic. It means that a small change in price will result in a proportionately larger change in quantity demanded. In this case, a 20% increase in price has led to a 50% decrease in quantity demanded. Therefore, the product is price sensitive and consumers are responsive to changes in price.
Answer: a) 2.5
Price elasticity is calculated with the formula:
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
Percentage Change in Quantity Demanded:
Quantity demanded has decreased from 8 units to 4 units.
Percentage Change in Quantity Demanded = ((New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded) x 100
= ((4-8)/8) x 100
= -50%
Percentage Change in Price:
Price has increased from Rs. 5 to Rs. 6.
Percentage Change in Price = ((New Price - Old Price) / Old Price) x 100
= ((6-5)/5) x 100
= 20%
Price Elasticity of Demand:
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
= (-50%) / (20%)
= -2.5
Interpretation of Price Elasticity:
As the price elasticity of demand is greater than 1, the demand for the product is elastic. It means that a small change in price will result in a proportionately larger change in quantity demanded. In this case, a 20% increase in price has led to a 50% decrease in quantity demanded. Therefore, the product is price sensitive and consumers are responsive to changes in price.
Answer: a) 2.5
Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?- a)Rs. 2
- b)Rs. 2.5
- c)Rs. 3
- d)Rs. 4
Correct answer is option 'A'. Can you explain this answer?
Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?
a)
Rs. 2
b)
Rs. 2.5
c)
Rs. 3
d)
Rs. 4
|
|
Niharika Chavan answered |
Calculation of Total Utility:
- Total utility = Rs. 5
- This means that the consumer has derived a total satisfaction worth Rs. 5 from the consumption of the commodity.
Calculation of Marginal Utility:
- Marginal utility = 1
- This means that the consumer derives an additional satisfaction of 1 unit from the consumption of each additional unit of the commodity.
Calculation of Consumer Surplus:
- Consumer surplus is the difference between the total amount that the consumer is willing to pay for a commodity and the actual amount paid by the consumer.
- In this case, the consumer has bought 3 units of the commodity.
- The amount that the consumer is willing to pay for the first unit is equal to the marginal utility of the first unit, which is 1.
- Similarly, the amount that the consumer is willing to pay for the second unit is also equal to 1.
- For the third unit, the consumer is willing to pay 1 more unit of satisfaction, which is equal to the marginal utility of the third unit, i.e., 1.
- Therefore, the total amount that the consumer is willing to pay for the 3 units of the commodity is equal to 3.
- However, the consumer has only paid Rs. 3 for the 3 units.
- Hence, the consumer surplus is equal to the difference between the amount that the consumer is willing to pay and the actual amount paid, which is Rs. 2.
Therefore, the correct answer is option 'A', i.e., Rs. 2.
- Total utility = Rs. 5
- This means that the consumer has derived a total satisfaction worth Rs. 5 from the consumption of the commodity.
Calculation of Marginal Utility:
- Marginal utility = 1
- This means that the consumer derives an additional satisfaction of 1 unit from the consumption of each additional unit of the commodity.
Calculation of Consumer Surplus:
- Consumer surplus is the difference between the total amount that the consumer is willing to pay for a commodity and the actual amount paid by the consumer.
- In this case, the consumer has bought 3 units of the commodity.
- The amount that the consumer is willing to pay for the first unit is equal to the marginal utility of the first unit, which is 1.
- Similarly, the amount that the consumer is willing to pay for the second unit is also equal to 1.
- For the third unit, the consumer is willing to pay 1 more unit of satisfaction, which is equal to the marginal utility of the third unit, i.e., 1.
- Therefore, the total amount that the consumer is willing to pay for the 3 units of the commodity is equal to 3.
- However, the consumer has only paid Rs. 3 for the 3 units.
- Hence, the consumer surplus is equal to the difference between the amount that the consumer is willing to pay and the actual amount paid, which is Rs. 2.
Therefore, the correct answer is option 'A', i.e., Rs. 2.
In expansion and contraction of demand _____.
- a)Both (c) & (d)
- b)Demand curve changes
- c)Slope of the demand curve changes
- d)Demand curve remains unchanged
Correct answer is option 'A'. Can you explain this answer?
In expansion and contraction of demand _____.
a)
Both (c) & (d)
b)
Demand curve changes
c)
Slope of the demand curve changes
d)
Demand curve remains unchanged
|
Freedom Institute answered |
In expansion and contraction of demand, the demand curve remains unchanged, and Slope of the demand curve changes
Original price of a commodity is Rs. 500 and quantity demanded of that is 20 kgs. If the price rises to Rs. 750 and the quantity demanded reduces to 15 kgs. The price elasticity of demand will be:- a)0.25
- b)0.50
- c)1.00
- d)1.50
Correct answer is option 'B'. Can you explain this answer?
Original price of a commodity is Rs. 500 and quantity demanded of that is 20 kgs. If the price rises to Rs. 750 and the quantity demanded reduces to 15 kgs. The price elasticity of demand will be:
a)
0.25
b)
0.50
c)
1.00
d)
1.50
|
|
Tanvi Pillai answered |
Heading: Calculation of Price Elasticity of Demand
To calculate the price elasticity of demand, we use the following formula:
Price Elasticity of Demand = (% Change in Quantity Demanded)/(% Change in Price)
Heading: Calculation of % Change in Quantity Demanded
The % change in quantity demanded can be calculated as follows:
% Change in Quantity Demanded = ((New Quantity Demanded - Old Quantity Demanded)/Old Quantity Demanded) x 100
% Change in Quantity Demanded = ((15-20)/20) x 100
% Change in Quantity Demanded = -25%
Heading: Calculation of % Change in Price
The % change in price can be calculated as follows:
% Change in Price = ((New Price - Old Price)/Old Price) x 100
% Change in Price = ((750-500)/500) x 100
% Change in Price = 50%
Heading: Calculation of Price Elasticity of Demand
Using the formula for price elasticity of demand and the % changes calculated above, we get:
Price Elasticity of Demand = (-25%)/(50%)
Price Elasticity of Demand = -0.5
Since price elasticity of demand is usually expressed as an absolute value, we take the absolute value of -0.5 which gives us 0.5.
Therefore, the price elasticity of demand in this case is 0.5 or 0.50 (option B). This means that the demand for the commodity is relatively inelastic as the % change in quantity demanded is less than the % change in price.
To calculate the price elasticity of demand, we use the following formula:
Price Elasticity of Demand = (% Change in Quantity Demanded)/(% Change in Price)
Heading: Calculation of % Change in Quantity Demanded
The % change in quantity demanded can be calculated as follows:
% Change in Quantity Demanded = ((New Quantity Demanded - Old Quantity Demanded)/Old Quantity Demanded) x 100
% Change in Quantity Demanded = ((15-20)/20) x 100
% Change in Quantity Demanded = -25%
Heading: Calculation of % Change in Price
The % change in price can be calculated as follows:
% Change in Price = ((New Price - Old Price)/Old Price) x 100
% Change in Price = ((750-500)/500) x 100
% Change in Price = 50%
Heading: Calculation of Price Elasticity of Demand
Using the formula for price elasticity of demand and the % changes calculated above, we get:
Price Elasticity of Demand = (-25%)/(50%)
Price Elasticity of Demand = -0.5
Since price elasticity of demand is usually expressed as an absolute value, we take the absolute value of -0.5 which gives us 0.5.
Therefore, the price elasticity of demand in this case is 0.5 or 0.50 (option B). This means that the demand for the commodity is relatively inelastic as the % change in quantity demanded is less than the % change in price.
Suppose the price of movies seen at a theatre rises from Rs. 120 per person to Rs. 200 per person. The theater manager observes that the rise in price is because attendance at a given movie is to fall from 300 persons to 200 persons. What is the price elasticity of demand for movies? (Use Arc Elasticity Method)
- a)0.1
- b)- 0.5
- c)0.7
- d)1.2
Correct answer is option 'B'. Can you explain this answer?
Suppose the price of movies seen at a theatre rises from Rs. 120 per person to Rs. 200 per person. The theater manager observes that the rise in price is because attendance at a given movie is to fall from 300 persons to 200 persons. What is the price elasticity of demand for movies? (Use Arc Elasticity Method)
a)
0.1
b)
- 0.5
c)
0.7
d)
1.2
|
|
Rishika Kumar answered |
Price elasticity of demand (PED) is calculated using the formula:
PED = % change in quantity demanded / % change in price
In this case, the % change in quantity demanded is calculated as:
% change in quantity demanded = (new quantity demanded - old quantity demanded) / old quantity demanded
% change in quantity demanded = (200 - 300) / 300 = -0.3333
The % change in price is calculated as:
% change in price = (new price - old price) / old price
% change in price = (200 - 120) / 120 = 0.6667
Now, we can substitute the values into the PED formula:
PED = -0.3333 / 0.6667
PED ≈ -0.5
The price elasticity of demand for movies is approximately -0.5.
PED = % change in quantity demanded / % change in price
In this case, the % change in quantity demanded is calculated as:
% change in quantity demanded = (new quantity demanded - old quantity demanded) / old quantity demanded
% change in quantity demanded = (200 - 300) / 300 = -0.3333
The % change in price is calculated as:
% change in price = (new price - old price) / old price
% change in price = (200 - 120) / 120 = 0.6667
Now, we can substitute the values into the PED formula:
PED = -0.3333 / 0.6667
PED ≈ -0.5
The price elasticity of demand for movies is approximately -0.5.
An increase in the demand for computers and an increase in the number of sellers of computers will- a)increase the number of computers bought
- b)decrease the price but increase the number of computers bought
- c)increase the price of a computer
- d)increase the price and the number of computers bought
Correct answer is option 'D'. Can you explain this answer?
An increase in the demand for computers and an increase in the number of sellers of computers will
a)
increase the number of computers bought
b)
decrease the price but increase the number of computers bought
c)
increase the price of a computer
d)
increase the price and the number of computers bought
|
|
Poonam Reddy answered |
Correct Answer :- d
Explanation : An increase in demand for computers and increase in number of sellers of computers will decrease the number of computers bought. This is because the supply and demand have increased and the quantity demanded will also increase to achieve equilibrium.
Cross elasticity of demand in Monopoly market is: - a)Elastic
- b)Zero
- c)Infinite
- d)One
Correct answer is 'B'. Can you explain this answer?
Cross elasticity of demand in Monopoly market is:
a)
Elastic
b)
Zero
c)
Infinite
d)
One
|
|
Meera Joshi answered |
Cross elasticity of demand refers to the change in demand of a commodity due to change in price of substitutes. In case of monopoly, there are no substitutes of the product,hence the cross elasticity of demand is zero.
A book “The Nature and significance of Economic Science” is written by:- a)Alfred Marshal
- b)Lionel Robbins
- c)Samuelson
- d)none
Correct answer is option 'B'. Can you explain this answer?
A book “The Nature and significance of Economic Science” is written by:
a)
Alfred Marshal
b)
Lionel Robbins
c)
Samuelson
d)
none
|
|
Poonam Reddy answered |
Book: "The Nature and significance of Economic Science"
Author: Lionel Robbins
Explanation:
- The book "The Nature and significance of Economic Science" is written by Lionel Robbins.
- Lionel Robbins was a renowned British economist and professor at the London School of Economics.
- In this book, Robbins discusses the fundamental principles and nature of economics as a science.
- The book explores the role of economics in understanding human behavior, resource allocation, and the functioning of markets.
- Robbins emphasizes the importance of economic analysis in making rational decisions and understanding the complexities of economic systems.
- The book is considered a classic work in the field of economics and has been influential in shaping economic thought.
- It provides a comprehensive overview of economic science and its significance in the modern world.
Conclusion:
The book "The Nature and significance of Economic Science" is written by Lionel Robbins, a prominent economist known for his contributions to the field of economics.
Author: Lionel Robbins
Explanation:
- The book "The Nature and significance of Economic Science" is written by Lionel Robbins.
- Lionel Robbins was a renowned British economist and professor at the London School of Economics.
- In this book, Robbins discusses the fundamental principles and nature of economics as a science.
- The book explores the role of economics in understanding human behavior, resource allocation, and the functioning of markets.
- Robbins emphasizes the importance of economic analysis in making rational decisions and understanding the complexities of economic systems.
- The book is considered a classic work in the field of economics and has been influential in shaping economic thought.
- It provides a comprehensive overview of economic science and its significance in the modern world.
Conclusion:
The book "The Nature and significance of Economic Science" is written by Lionel Robbins, a prominent economist known for his contributions to the field of economics.
Suppose the price of movies seen at a theatre rises form Rs. 120 per person to Rs. 200 per person. The theatre manger observes that the rise in price leads to a fall in attendance at a given movie from 300 to 200 persons what is then price elasticity of demand for movies:- a)0.5
- b)0.8
- c)1
- d)1.2
Correct answer is option 'B'. Can you explain this answer?
Suppose the price of movies seen at a theatre rises form Rs. 120 per person to Rs. 200 per person. The theatre manger observes that the rise in price leads to a fall in attendance at a given movie from 300 to 200 persons what is then price elasticity of demand for movies:
a)
0.5
b)
0.8
c)
1
d)
1.2
|
Nandini Iyer answered |
Arc elasticity may be expressed as: [(Q1 - Q)/(Q1 + Q)] x [(P1 + P)/(P1 - P)]
Therefore,
[(300 - 200)/(300 + 200)] x [(200 + 120)/(200 - 120)]
= (100/500) x (320/80)
So, Arc elasticity = 4/5 = 0.8
(differences were large hence arc elasticity is used.)
In case of an inferior good, the income elasticity of demand is: - a)Positive
- b)Zero
- c)Negative
- d)Infinite
Correct answer is option 'C'. Can you explain this answer?
In case of an inferior good, the income elasticity of demand is:
a)
Positive
b)
Zero
c)
Negative
d)
Infinite
|
|
Simran Pillai answered |
In the case of an inferior good, the income elasticity of demand is Negative. A negative income elasticity of demand is associated with inferior goods; an increase in income will lead to a fall in the demand and may lead to changes to more luxurious substitutes.
A demand curve parallel to the Y-axis implies:- a)Ep = 0
- b)Ep = 1
- c)Ep < 1
- d)Ep > 1
Correct answer is option 'C'. Can you explain this answer?
A demand curve parallel to the Y-axis implies:
a)
Ep = 0
b)
Ep = 1
c)
Ep < 1
d)
Ep > 1
|
|
Shanaya Dasgupta answered |
The horizontal demand curve parallel to x-axis implies that the elasticity of demand is infinite.It is zero when the demand curve is parallel to the y-axis.
Price of Tiffin Box is Rs. 100 per unit and the quantity demanded in market is 1,25,000 units. Company increased the price to Rs. 125. Due to this increase in price, quantity demanded decreases to 1, 00,000 units. What will be the price elasticity of demand?
- a)1.25
- b)1.00
- c)0.80
- d)None of the above.
Correct answer is option 'C'. Can you explain this answer?
Price of Tiffin Box is Rs. 100 per unit and the quantity demanded in market is 1,25,000 units. Company increased the price to Rs. 125. Due to this increase in price, quantity demanded decreases to 1, 00,000 units. What will be the price elasticity of demand?
a)
1.25
b)
1.00
c)
0.80
d)
None of the above.
|
Srsps answered |
Correct Answer :- C
Explanation : Q1 = 100 P1 = 125000
Q2 = 125 P2 = 100000
(Q2-Q1)/Q = P(P2-P1)
=> (25000/125000) * (100/25)
= 4/5
= 0.8
A consumer spends Rs. 80 on purchasing a commodity when its price is Re. 1 per unit and spends Rs. 96 when the price is Rs. 2 per unit. Calculate the price elasticity of demand. - a)0.2
- b)0.3
- c)0.4
- d)0.5
Correct answer is option 'C'. Can you explain this answer?
A consumer spends Rs. 80 on purchasing a commodity when its price is Re. 1 per unit and spends Rs. 96 when the price is Rs. 2 per unit. Calculate the price elasticity of demand.
a)
0.2
b)
0.3
c)
0.4
d)
0.5
|
|
Jayant Mishra answered |
Initial Total Expenditure (TEo)=Rs 80
Final Total Expenditure (TE1)=Rs 96
Initial Price (Po)=Rs 1
Final Price (P1)=Rs 2
Now, Quantity Q = TE/P
Qo = 80/1 = 80
Q1 = 96/2 = 48
Now,
Ed=(−)[Po/Qo] x [ΔQ/ΔP]
Ed=(−)1/80 x [48−80]/(2−1)
Ed=(−)1/80 x (−32/1)
Ed=(−)−0.4
Ed=0.4
Thus, the price elasticity of demand is 0.4.
All but one of the following are assumed to remain the same while drawing an individual’s demand curve for a commodity. Which one is it?- a)The preference of the individual.
- b)His monetary income.
- c)Price.
- d)Price of related goods.
Correct answer is 'C'. Can you explain this answer?
All but one of the following are assumed to remain the same while drawing an individual’s demand curve for a commodity. Which one is it?
a)
The preference of the individual.
b)
His monetary income.
c)
Price.
d)
Price of related goods.
|
|
Arjun Singhania answered |
Only one i.e. price changes, all others like price of related goods, income, taste and preference remain constant, while drawing an individual’s Demand curve for a commodity
If a 20% fall in price brings about a 10% fall in quantity supplied, in such a case elasticity of supply will be equal to:- a)2.0
- b)0.5
- c)1.0
- d)1.5
Correct answer is option 'B'. Can you explain this answer?
If a 20% fall in price brings about a 10% fall in quantity supplied, in such a case elasticity of supply will be equal to:
a)
2.0
b)
0.5
c)
1.0
d)
1.5
|
|
Freedom Institute answered |
Correct answer is option B.
Explanation:
The elasticity of supply is a measure of how the quantity supplied of a good responds to a change in its price. It is calculated using the following formula:
Elasticity of Supply = (% Change in Quantity Supplied) / (% Change in Price)
In this case, we are given:
- A 20% fall in price (which is a -20% change in price)
- A 10% fall in quantity supplied (which is a -10% change in quantity supplied)
Now, we can plug these values into the formula:
Elasticity of Supply = (-10%) / (-20%)
Elasticity of Supply = 0.5
So, the elasticity of supply in this case is 0.5. This means that for every 1% decrease in price, the quantity supplied will decrease by 0.5%. This indicates that the supply is inelastic, as the percentage change in quantity supplied is less than the percentage change in price.
Elasticity of Supply = (% Change in Quantity Supplied) / (% Change in Price)
In this case, we are given:
- A 20% fall in price (which is a -20% change in price)
- A 10% fall in quantity supplied (which is a -10% change in quantity supplied)
Now, we can plug these values into the formula:
Elasticity of Supply = (-10%) / (-20%)
Elasticity of Supply = 0.5
So, the elasticity of supply in this case is 0.5. This means that for every 1% decrease in price, the quantity supplied will decrease by 0.5%. This indicates that the supply is inelastic, as the percentage change in quantity supplied is less than the percentage change in price.
When change in the quantity supplied is proportionate to the change in the price, the producer is said to have ______:- a)Perfectly elastic supply
- b)Relatively elastic supply
- c)Unitary elastic supply
- d)Perfectly inelastic supply
Correct answer is option 'C'. Can you explain this answer?
When change in the quantity supplied is proportionate to the change in the price, the producer is said to have ______:
a)
Perfectly elastic supply
b)
Relatively elastic supply
c)
Unitary elastic supply
d)
Perfectly inelastic supply
|
|
Srsps answered |
The correct answer is (C) Unitary elastic supply.
Explanation:
Unitary Elastic Supply:
- Unitary elastic supply occurs when the percentage change in quantity supplied is equal to the percentage change in price.
- In this case, the price elasticity of supply (PES) is equal to 1.
- PES is calculated as the percentage change in quantity supplied divided by the percentage change in price.
- Unitary elastic supply reflects a situation where producers are able to adjust their production levels proportionately to the changes in price.
- This type of supply response is more likely to be observed in markets where producers have some flexibility in adjusting their production levels but are not able to do so instantaneously or without constraints.
- Unitary elastic supply occurs when the percentage change in quantity supplied is equal to the percentage change in price.
- In this case, the price elasticity of supply (PES) is equal to 1.
- PES is calculated as the percentage change in quantity supplied divided by the percentage change in price.
- Unitary elastic supply reflects a situation where producers are able to adjust their production levels proportionately to the changes in price.
- This type of supply response is more likely to be observed in markets where producers have some flexibility in adjusting their production levels but are not able to do so instantaneously or without constraints.
When supply is perfectly inelastic, elasticity of supply is equal to:- a)+1
- b)0
- c).1
- d)Infinity
Correct answer is option 'B'. Can you explain this answer?
When supply is perfectly inelastic, elasticity of supply is equal to:
a)
+1
b)
0
c)
.1
d)
Infinity
|
|
Freedom Institute answered |
Correct answer is option B.
Explanation:
In this case, the elasticity of supply is equal to 0.
Perfectly Inelastic Supply:
- In the case of perfectly inelastic supply, the quantity supplied remains the same even when the price changes.
- This means that the percentage change in quantity supplied is 0, regardless of the percentage change in price.
Perfectly Inelastic Supply:
- In the case of perfectly inelastic supply, the quantity supplied remains the same even when the price changes.
- This means that the percentage change in quantity supplied is 0, regardless of the percentage change in price.
Other things remaining constant, if the price of the inferior goods decreases then what will be the effect?- a)Demand increases
- b)Demand decreases
- c)Quantity demanded increases
- d)Quantity demanded decreases
Correct answer is option 'D'. Can you explain this answer?
Other things remaining constant, if the price of the inferior goods decreases then what will be the effect?
a)
Demand increases
b)
Demand decreases
c)
Quantity demanded increases
d)
Quantity demanded decreases
|
|
Arka Tiwari answered |
Effect of Decrease in Price of Inferior Goods on Quantity Demanded
Inferior goods are those goods whose demand decreases as the income of the consumer increases. These goods are generally of lower quality and cheaper compared to the normal goods. Examples of inferior goods include low-quality food items, second-hand clothes, and public transport.
When the price of an inferior good decreases, it means that the good has become relatively cheaper compared to other goods. This change in price has an effect on the quantity demanded of the good. The effect can be explained using the law of demand, which states that the quantity demanded of a good decreases as the price of the good increases, and vice versa.
The effect of a decrease in the price of inferior goods on quantity demanded can be explained as follows:
1. Income Effect: When the price of an inferior good decreases, the consumer's purchasing power increases. This means that the consumer can now buy more of the good with the same amount of income. However, since inferior goods are of lower quality, the consumer may choose to switch to normal goods as their income increases. Therefore, the quantity demanded of an inferior good decreases as the consumer's income increases.
2. Substitution Effect: When the price of an inferior good decreases, it becomes relatively cheaper compared to other goods. This makes the inferior good more attractive to consumers compared to normal goods, which are relatively expensive. However, as the consumer's income increases, they may choose to switch to normal goods, which are of higher quality. Therefore, the quantity demanded of an inferior good decreases as the consumer's income increases.
Conclusion
In conclusion, when the price of an inferior good decreases, the quantity demanded of the good decreases. This is because the consumer's income increases, and they may choose to switch to normal goods, which are of higher quality. Therefore, the law of demand holds for inferior goods as well, and the quantity demanded of an inferior good decreases as its price decreases.
Inferior goods are those goods whose demand decreases as the income of the consumer increases. These goods are generally of lower quality and cheaper compared to the normal goods. Examples of inferior goods include low-quality food items, second-hand clothes, and public transport.
When the price of an inferior good decreases, it means that the good has become relatively cheaper compared to other goods. This change in price has an effect on the quantity demanded of the good. The effect can be explained using the law of demand, which states that the quantity demanded of a good decreases as the price of the good increases, and vice versa.
The effect of a decrease in the price of inferior goods on quantity demanded can be explained as follows:
1. Income Effect: When the price of an inferior good decreases, the consumer's purchasing power increases. This means that the consumer can now buy more of the good with the same amount of income. However, since inferior goods are of lower quality, the consumer may choose to switch to normal goods as their income increases. Therefore, the quantity demanded of an inferior good decreases as the consumer's income increases.
2. Substitution Effect: When the price of an inferior good decreases, it becomes relatively cheaper compared to other goods. This makes the inferior good more attractive to consumers compared to normal goods, which are relatively expensive. However, as the consumer's income increases, they may choose to switch to normal goods, which are of higher quality. Therefore, the quantity demanded of an inferior good decreases as the consumer's income increases.
Conclusion
In conclusion, when the price of an inferior good decreases, the quantity demanded of the good decreases. This is because the consumer's income increases, and they may choose to switch to normal goods, which are of higher quality. Therefore, the law of demand holds for inferior goods as well, and the quantity demanded of an inferior good decreases as its price decreases.
If the price is decreased form Rs. 10 to Rs. 8 of a commodity but the quantity demanded remains the same price elasticity is _________.- a)1
- b)0
- c)?
- d)None
Correct answer is option 'B'. Can you explain this answer?
If the price is decreased form Rs. 10 to Rs. 8 of a commodity but the quantity demanded remains the same price elasticity is _________.
a)
1
b)
0
c)
?
d)
None
|
Bhaskar Sharma answered |
When the price elasticity of demand for a good is perfectly inelastic (Ed =0), changes in the price do not affect the quantity demanded for the good; and hence option B is the correct answer.
When supply price increase in the short run, the profit of the producer________:- a)Increases
- b)Decreases
- c)Remains constant
- d)Decreases marginally
Correct answer is option 'A'. Can you explain this answer?
When supply price increase in the short run, the profit of the producer________:
a)
Increases
b)
Decreases
c)
Remains constant
d)
Decreases marginally
|
Kavita Joshi answered |
Increases and decreases in supply and demand are represented by shifts to the left (decreases) or right (increases) of the demand or supply curve. ... Demand Increase: price increases, quantity increases. Demand Decrease: price decreases, quantity decreases. Supply Increase: price decreases, quantity increases.
Can you explain the answer of this question below:The price of hot-dogs increases by 22% and the quantity demanded falls by 25% this indicates that demand for hot dogs is:
- A:
Elastic
- B:
Inelastic
- C:
Unitary elastic
- D:
Perfectly elastic
The answer is a.
The price of hot-dogs increases by 22% and the quantity demanded falls by 25% this indicates that demand for hot dogs is:
Elastic
Inelastic
Unitary elastic
Perfectly elastic
|
Pragati Shah answered |
According to relatively elastic demand, an increase in price will lead to greater than proportionate change in quantity demanded. In this case price increases by 22% and quantity demanded falls by 25% which is greater than 22% (increase in price) so the ans is elastic.
The demand of which type of goods do not decrease with increase in its price- a)Comforts
- b)Luxury
- c)Necessities
- d)Capital goods
Correct answer is option 'C'. Can you explain this answer?
The demand of which type of goods do not decrease with increase in its price
a)
Comforts
b)
Luxury
c)
Necessities
d)
Capital goods
|
|
Ankita Mukherjee answered |
An increase or decrease in the price of such a good does not affect its quantity demanded. These goods have a perfectly inelastic relationship, in that any change in price does not change the quantity demanded.
When price falls by 5% and demand increase by 6%, then elasticity of demand is______.- a)Elastic
- b)Inelastic
- c)Unitary elastic
- d)Zero.
Correct answer is option 'A'. Can you explain this answer?
When price falls by 5% and demand increase by 6%, then elasticity of demand is______.
a)
Elastic
b)
Inelastic
c)
Unitary elastic
d)
Zero.
|
|
Nikita Singh answered |
EOD =6/5
=1.2
Since EOD is greater than 1. So, it is elastic.
=1.2
Since EOD is greater than 1. So, it is elastic.
Cardinal approach is related to : - a)Indifference curve
- b)Equi-marginal utility
- c)Law of diminishing returns
- d)None of these
Correct answer is 'B'. Can you explain this answer?
Cardinal approach is related to :
a)
Indifference curve
b)
Equi-marginal utility
c)
Law of diminishing returns
d)
None of these
|
|
Lakshmi Kaur answered |
The cardinal approach is related to Equi-marginal utility.
Explanation:
- Cardinal approach is one of the approaches to measure utility in economics. It emphasizes the quantification of utility and assumes that it can be measured numerically.
- Equi-marginal utility is a concept in economics that assumes that a rational consumer allocates his/her income among different goods in such a way that the marginal utility derived from the last unit of each good is equal.
- Equi-marginal utility is based on the cardinal approach as it involves the measurement of marginal utility in numerical terms.
- The concept of indifference curve, on the other hand, is based on the ordinal approach, which assumes that utility can only be ranked in order of preference, but not measured in numerical terms.
- The law of diminishing returns is a concept in economics that states that after a certain point, the marginal product of a factor of production decreases as the quantity of the factor increases, while holding other factors constant. This concept is related to production, not to utility.
- Therefore, the correct answer is (B) Equi-marginal utility.
Explanation:
- Cardinal approach is one of the approaches to measure utility in economics. It emphasizes the quantification of utility and assumes that it can be measured numerically.
- Equi-marginal utility is a concept in economics that assumes that a rational consumer allocates his/her income among different goods in such a way that the marginal utility derived from the last unit of each good is equal.
- Equi-marginal utility is based on the cardinal approach as it involves the measurement of marginal utility in numerical terms.
- The concept of indifference curve, on the other hand, is based on the ordinal approach, which assumes that utility can only be ranked in order of preference, but not measured in numerical terms.
- The law of diminishing returns is a concept in economics that states that after a certain point, the marginal product of a factor of production decreases as the quantity of the factor increases, while holding other factors constant. This concept is related to production, not to utility.
- Therefore, the correct answer is (B) Equi-marginal utility.
What is income elasticity of demand, when income changes by 20% and demand changes by 40%- a)1/2
- b)2
- c)0.33
- d)None
Correct answer is 'B'. Can you explain this answer?
What is income elasticity of demand, when income changes by 20% and demand changes by 40%
a)
1/2
b)
2
c)
0.33
d)
None
|
|
Rajeev Chaudhary answered |
Ed=%change in demand\%change in price
Ed= 40%/20%
Ed= 2%
Which economist said that money is the measuring rod of utility?- a)A.C Pigou
- b)Marshall
- c)Adam Smith
- d)Robbins
Correct answer is option 'A'. Can you explain this answer?
Which economist said that money is the measuring rod of utility?
a)
A.C Pigou
b)
Marshall
c)
Adam Smith
d)
Robbins
|
|
Arjun Singhania answered |
According to Pigou, welfare resides in a man’s state of mind or consciousness which is made up of his satisfactions or utilities. The basis of welfare, therefore, is necessarily the extent to which an individual’s desires are met. Social welfare is regarded as the summation of all individual welfares in a society. Since general welfare is a very wide, complicated and impracticable notion, Pigou delimits the range of his study to economic welfare. As he himself observes, economic welfare is by no means an index of total welfare because many other elements in the latter, like the quality of work, one’s environment, human relationships, status, housing, and public security are absent from economic welfare.
He, therefore, defines economic welfare as “that part of social (general) welfare that can be brought directly or indirectly into relation with the measuring rod of money.” Thus economic welfare, in the Pigovian sense, implies the satisfaction of utility derived by an individual from the use of exchangeable goods and services.
For a commodity with a unitary elastic demand curve if the price of the commodity raises, then the consumer’s total expenditure on this commodity would: - a)Increase
- b)Decrease
- c)Remains constant
- d)Either increase or decrease
Correct answer is option 'C'. Can you explain this answer?
For a commodity with a unitary elastic demand curve if the price of the commodity raises, then the consumer’s total expenditure on this commodity would:
a)
Increase
b)
Decrease
c)
Remains constant
d)
Either increase or decrease
|
|
Kavita Joshi answered |
When the demand is unitary elastic, an increase or decrease in price of good will have no effect on total expenditure. So the total expenditure of consumer will remain same with an increase in price.
Consumer Surplus is based on which concept?- a)Diminishing Marginal Utility
- b)Law of Demand
- c)Indifference curve Approach
- d)None
Correct answer is option 'A'. Can you explain this answer?
Consumer Surplus is based on which concept?
a)
Diminishing Marginal Utility
b)
Law of Demand
c)
Indifference curve Approach
d)
None
|
|
Akshay Saini answered |
Consumer surplus is based on the economic theory of marginal utility, which is the additional satisfaction a consumer gains from one more unit of a good or service.
At a price of Rs. 25 per kg, the supply of a commodity is 10,000 kg per week. An increase in its price to Rs. 30 per kg, increases the supply of the commodity to 12,000 kg per week. The elasticity of supply will be:-- a)0.75
- b)1.00
- c)1.50
- d)1.75
Correct answer is option 'B'. Can you explain this answer?
At a price of Rs. 25 per kg, the supply of a commodity is 10,000 kg per week. An increase in its price to Rs. 30 per kg, increases the supply of the commodity to 12,000 kg per week. The elasticity of supply will be:-
a)
0.75
b)
1.00
c)
1.50
d)
1.75
|
|
Akshay Saini answered |
Given information:
Price of commodity (P1) = Rs. 25 per kg
Supply of commodity (Q1) = 10,000 kg per week
New price of commodity (P2) = Rs. 30 per kg
New supply of commodity (Q2) = 12,000 kg per week
Formula for calculating elasticity of supply:
Elasticity of supply = % change in quantity supplied / % change in price
Calculation:
% change in quantity supplied = (Q2 - Q1) / Q1 x 100
= (12,000 - 10,000) / 10,000 x 100
= 20%
% change in price = (P2 - P1) / P1 x 100
= (30 - 25) / 25 x 100
= 20%
Elasticity of supply = % change in quantity supplied / % change in price
= 20% / 20%
= 1.00
Therefore, the elasticity of supply is 1.00, which means that the supply of the commodity is perfectly elastic.
Price of commodity (P1) = Rs. 25 per kg
Supply of commodity (Q1) = 10,000 kg per week
New price of commodity (P2) = Rs. 30 per kg
New supply of commodity (Q2) = 12,000 kg per week
Formula for calculating elasticity of supply:
Elasticity of supply = % change in quantity supplied / % change in price
Calculation:
% change in quantity supplied = (Q2 - Q1) / Q1 x 100
= (12,000 - 10,000) / 10,000 x 100
= 20%
% change in price = (P2 - P1) / P1 x 100
= (30 - 25) / 25 x 100
= 20%
Elasticity of supply = % change in quantity supplied / % change in price
= 20% / 20%
= 1.00
Therefore, the elasticity of supply is 1.00, which means that the supply of the commodity is perfectly elastic.
The following are causes of shift in demand EXCEPT the one- a)Change in income
- b)Change in price
- c)Change in fashion
- d)Change in prices of substitutes
Correct answer is option 'B'. Can you explain this answer?
The following are causes of shift in demand EXCEPT the one
a)
Change in income
b)
Change in price
c)
Change in fashion
d)
Change in prices of substitutes
|
|
Srsps answered |
The correct answer is B:Change in price.
Explanation:
To explain in detail, let's first understand the concept of demand. Demand refers to the quantity of a good or service that consumers are willing and able to purchase at a given price level. A shift in demand refers to a change in the entire demand curve, which represents a change in the quantity demanded at all price levels.
Now, let's discuss the factors that cause a shift in demand:
1. Change in income: An increase in consumers' income generally leads to an increase in demand for goods and services, as people can afford to buy more. Conversely, a decrease in income leads to a decrease in demand.
2. Change in price: This factor does not cause a shift in demand. Instead, it causes a movement along the demand curve. When the price of a good or service increases, the quantity demanded decreases, and when the price decreases, the quantity demanded increases. This is known as the law of demand. A change in price does not shift the demand curve but causes a movement from one point to another on the same demand curve.
3. Change in fashion: As consumer preferences and tastes change, the demand for goods and services may also change. For example, if a particular clothing style becomes popular, the demand for that style will increase, causing a shift in the demand curve.
4. Change in prices of substitutes: Substitutes are goods that can replace each other in consumption. If the price of a substitute good increases, consumers may choose to buy the original good instead, which will increase the demand for the original good. On the other hand, if the price of a substitute decreases, consumers may switch to the substitute, causing a decrease in demand for the original good. This results in a shift in the demand curve.
In conclusion, changes in income, fashion, and prices of substitutes can cause shifts in demand, while a change in price results in a movement along the demand curve rather than a shift.
Explanation:
To explain in detail, let's first understand the concept of demand. Demand refers to the quantity of a good or service that consumers are willing and able to purchase at a given price level. A shift in demand refers to a change in the entire demand curve, which represents a change in the quantity demanded at all price levels.
Now, let's discuss the factors that cause a shift in demand:
1. Change in income: An increase in consumers' income generally leads to an increase in demand for goods and services, as people can afford to buy more. Conversely, a decrease in income leads to a decrease in demand.
2. Change in price: This factor does not cause a shift in demand. Instead, it causes a movement along the demand curve. When the price of a good or service increases, the quantity demanded decreases, and when the price decreases, the quantity demanded increases. This is known as the law of demand. A change in price does not shift the demand curve but causes a movement from one point to another on the same demand curve.
3. Change in fashion: As consumer preferences and tastes change, the demand for goods and services may also change. For example, if a particular clothing style becomes popular, the demand for that style will increase, causing a shift in the demand curve.
4. Change in prices of substitutes: Substitutes are goods that can replace each other in consumption. If the price of a substitute good increases, consumers may choose to buy the original good instead, which will increase the demand for the original good. On the other hand, if the price of a substitute decreases, consumers may switch to the substitute, causing a decrease in demand for the original good. This results in a shift in the demand curve.
In conclusion, changes in income, fashion, and prices of substitutes can cause shifts in demand, while a change in price results in a movement along the demand curve rather than a shift.
The satisfaction which a consumer derives in the consumption of a commodity is equal to Rs. 320. The price of that commodity is Rs. 180. What will be his consumer surplus?- a)180
- b)200
- c)140
- d)500
Correct answer is option 'C'. Can you explain this answer?
The satisfaction which a consumer derives in the consumption of a commodity is equal to Rs. 320. The price of that commodity is Rs. 180. What will be his consumer surplus?
a)
180
b)
200
c)
140
d)
500
|
|
Disha Joshi answered |
Consumer Surplus Calculation
Given:
Price of commodity (P) = Rs. 180
Total satisfaction derived (TS) = Rs. 320
To calculate the consumer surplus, we need to find the difference between the total satisfaction derived by the consumer and the price paid for the commodity.
Consumer Surplus (CS) = Total satisfaction derived (TS) - Price of commodity (P)
Substituting the given values, we get:
CS = 320 - 180
CS = Rs. 140
Therefore, the consumer surplus is Rs. 140.
Explanation
Consumer surplus is a measure of the difference between the total satisfaction derived by a consumer from consuming a commodity and the price paid for it. In this case, the total satisfaction derived by the consumer is Rs. 320, and the price paid for the commodity is Rs. 180. The consumer surplus is calculated as the difference between these two values, which is Rs. 140.
Consumer surplus is an important concept in economics as it helps in understanding the welfare of consumers in a market. A higher consumer surplus indicates that consumers are deriving more satisfaction from the goods or services they are consuming, and are willing to pay more for them. This, in turn, indicates that the market is functioning efficiently and is meeting the needs of consumers.
Given:
Price of commodity (P) = Rs. 180
Total satisfaction derived (TS) = Rs. 320
To calculate the consumer surplus, we need to find the difference between the total satisfaction derived by the consumer and the price paid for the commodity.
Consumer Surplus (CS) = Total satisfaction derived (TS) - Price of commodity (P)
Substituting the given values, we get:
CS = 320 - 180
CS = Rs. 140
Therefore, the consumer surplus is Rs. 140.
Explanation
Consumer surplus is a measure of the difference between the total satisfaction derived by a consumer from consuming a commodity and the price paid for it. In this case, the total satisfaction derived by the consumer is Rs. 320, and the price paid for the commodity is Rs. 180. The consumer surplus is calculated as the difference between these two values, which is Rs. 140.
Consumer surplus is an important concept in economics as it helps in understanding the welfare of consumers in a market. A higher consumer surplus indicates that consumers are deriving more satisfaction from the goods or services they are consuming, and are willing to pay more for them. This, in turn, indicates that the market is functioning efficiently and is meeting the needs of consumers.
Increase in Price from Rs. 4 to Rs. 6 then decrease in demand from 15 units to 10 units. What is the price elasticity. (Point elasticity)- a)0.66
- b)5
- c)-1.5
- d)2
Correct answer is option 'A'. Can you explain this answer?
Increase in Price from Rs. 4 to Rs. 6 then decrease in demand from 15 units to 10 units. What is the price elasticity. (Point elasticity)
a)
0.66
b)
5
c)
-1.5
d)
2
|
|
Mehul Saini answered |
Given:
Initial price (P1) = Rs. 4
Final price (P2) = Rs. 6
Initial demand (Q1) = 15 units
Final demand (Q2) = 10 units
To calculate price elasticity of demand, we use the formula:
Elasticity = ((Q2 - Q1) / Q1) / ((P2 - P1) / P1)
Substituting the values, we get:
Elasticity = ((10 - 15) / 15) / ((6 - 4) / 4)
Elasticity = (-5/15) / (2/4)
Elasticity = -0.66
However, the question asks for point elasticity. For that, we need to take the absolute value of the elasticity:
Point Elasticity = |-0.66|
Point Elasticity = 0.66
Therefore, the correct answer is option A) 0.66.
Explanation:
- Price elasticity of demand measures the responsiveness of demand to a change in price.
- It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
- The value of elasticity can be negative, positive or zero. A negative value indicates an inverse relationship between price and demand (i.e., as price increases, demand decreases).
- The magnitude of elasticity determines whether demand is elastic (greater than 1), inelastic (less than 1), or unitary (equal to 1).
- Point elasticity measures the elasticity at a specific point on the demand curve, i.e., the elasticity at a particular price and quantity.
- In this case, the price increased by 50% (from Rs. 4 to Rs. 6) and the demand decreased by 33.33% (from 15 units to 10 units).
- Plugging in the values in the formula, we get a negative value of -0.66 for elasticity, indicating an inverse relationship between price and demand.
- However, since the question asks for point elasticity, we take the absolute value to get 0.66, indicating that demand is relatively inelastic at this point on the demand curve.
Initial price (P1) = Rs. 4
Final price (P2) = Rs. 6
Initial demand (Q1) = 15 units
Final demand (Q2) = 10 units
To calculate price elasticity of demand, we use the formula:
Elasticity = ((Q2 - Q1) / Q1) / ((P2 - P1) / P1)
Substituting the values, we get:
Elasticity = ((10 - 15) / 15) / ((6 - 4) / 4)
Elasticity = (-5/15) / (2/4)
Elasticity = -0.66
However, the question asks for point elasticity. For that, we need to take the absolute value of the elasticity:
Point Elasticity = |-0.66|
Point Elasticity = 0.66
Therefore, the correct answer is option A) 0.66.
Explanation:
- Price elasticity of demand measures the responsiveness of demand to a change in price.
- It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
- The value of elasticity can be negative, positive or zero. A negative value indicates an inverse relationship between price and demand (i.e., as price increases, demand decreases).
- The magnitude of elasticity determines whether demand is elastic (greater than 1), inelastic (less than 1), or unitary (equal to 1).
- Point elasticity measures the elasticity at a specific point on the demand curve, i.e., the elasticity at a particular price and quantity.
- In this case, the price increased by 50% (from Rs. 4 to Rs. 6) and the demand decreased by 33.33% (from 15 units to 10 units).
- Plugging in the values in the formula, we get a negative value of -0.66 for elasticity, indicating an inverse relationship between price and demand.
- However, since the question asks for point elasticity, we take the absolute value to get 0.66, indicating that demand is relatively inelastic at this point on the demand curve.
If Rs. 20% fall in the price brings about a 10% fall in the quantity supplied, then the elasticity of supply will be equal to:- a)2.0
- b)0.5
- c)1.0
- d)1.5
Correct answer is option 'B'. Can you explain this answer?
If Rs. 20% fall in the price brings about a 10% fall in the quantity supplied, then the elasticity of supply will be equal to:
a)
2.0
b)
0.5
c)
1.0
d)
1.5
|
|
Poonam Reddy answered |
Correct answer is Option B.
Explanation:
The elasticity of supply measures the responsiveness of the quantity supplied to changes in the price of the good. It is calculated using the following formula:
Elasticity of Supply (EoS) = (% change in quantity supplied) / (% change in price)
In this case, we are given:
- A 20% fall in the price (which is a -20% change in price)
- A 10% fall in the quantity supplied (which is a -10% change in quantity supplied)
Now, we can calculate the elasticity of supply:
EoS = (-10%) / (-20%)
EoS = 0.5
Therefore, the elasticity of supply in this case is equal to 0.5, which is option b. This value indicates that the quantity supplied is relatively inelastic with respect to the price. In other words, a change in the price of the good results in a smaller percentage change in the quantity supplied.
Elasticity of Supply (EoS) = (% change in quantity supplied) / (% change in price)
In this case, we are given:
- A 20% fall in the price (which is a -20% change in price)
- A 10% fall in the quantity supplied (which is a -10% change in quantity supplied)
Now, we can calculate the elasticity of supply:
EoS = (-10%) / (-20%)
EoS = 0.5
Therefore, the elasticity of supply in this case is equal to 0.5, which is option b. This value indicates that the quantity supplied is relatively inelastic with respect to the price. In other words, a change in the price of the good results in a smaller percentage change in the quantity supplied.
Giffen paradox is an exception of - a)Demand
- b)Supply
- c)Production
- d)Utility
Correct answer is option 'A'. Can you explain this answer?
Giffen paradox is an exception of
a)
Demand
b)
Supply
c)
Production
d)
Utility
|
|
Arun Khanna answered |
In economics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa—violating the basic law of demand in microeconomics. According to the Law of Demand, when the price of a commodity falls the demand for it rises. Giffen's Paradox is an exception to this law.
Can you explain the answer of this question below:Movement along the same demand curve shows :
- A:
Expansion of demand
- B:
Expansion of supply
- C:
Expansion and contraction of demand
- D:
Increase and decrease of demand
The answer is c.
Movement along the same demand curve shows :
Expansion of demand
Expansion of supply
Expansion and contraction of demand
Increase and decrease of demand
|
|
Aditya Das answered |
Explanation:
When movement occurs along the same demand curve, it shows a change in the quantity demanded of a product or service at different prices. This change in the quantity demanded is due to factors such as changes in income, changes in consumer preferences, or changes in the price of substitute or complementary goods.
Expansion and Contraction of Demand:
Movement along the same demand curve can show both expansion and contraction of demand. The direction of the movement depends on the price level and the elasticity of demand.
- Expansion of Demand: If the price of a product decreases, the quantity demanded increases. This movement along the same demand curve shows an expansion of demand. In other words, consumers are willing to buy more of the product at lower prices.
- Contraction of Demand: On the other hand, if the price of a product increases, the quantity demanded decreases. This movement along the same demand curve shows a contraction of demand. In other words, consumers are willing to buy less of the product at higher prices.
Therefore, movement along the same demand curve shows the expansion and contraction of demand due to changes in price levels. It is important to note that a shift in the demand curve would indicate a change in demand due to factors other than price.
When movement occurs along the same demand curve, it shows a change in the quantity demanded of a product or service at different prices. This change in the quantity demanded is due to factors such as changes in income, changes in consumer preferences, or changes in the price of substitute or complementary goods.
Expansion and Contraction of Demand:
Movement along the same demand curve can show both expansion and contraction of demand. The direction of the movement depends on the price level and the elasticity of demand.
- Expansion of Demand: If the price of a product decreases, the quantity demanded increases. This movement along the same demand curve shows an expansion of demand. In other words, consumers are willing to buy more of the product at lower prices.
- Contraction of Demand: On the other hand, if the price of a product increases, the quantity demanded decreases. This movement along the same demand curve shows a contraction of demand. In other words, consumers are willing to buy less of the product at higher prices.
Therefore, movement along the same demand curve shows the expansion and contraction of demand due to changes in price levels. It is important to note that a shift in the demand curve would indicate a change in demand due to factors other than price.
In case of straight line demand curve meeting two axis, the price elasticity of demand at the point where the curve meets Y-axis would be _______- a)Zero.
- b)Greater than one
- c)Less than one
- d)Infinity
Correct answer is option 'D'. Can you explain this answer?
In case of straight line demand curve meeting two axis, the price elasticity of demand at the point where the curve meets Y-axis would be _______
a)
Zero.
b)
Greater than one
c)
Less than one
d)
Infinity
|
|
Priya Patel answered |
The slope of a straight-line demand curve, one with a constant slope, has constantly changing elasticity. ... No two points on a straight-line demand curve have the same elasticity. The price elasticity of demand is different at each point on a demand curve with constant slope.
Chapter doubts & questions for Theory of Demand and Supply - Business Economics for CA Foundation 2025 is part of CA Foundation exam preparation. The chapters have been prepared according to the CA Foundation exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for CA Foundation 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
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