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Page 1 CPT Section C General Economics Chapter 2 Unit 1 CA. Shweta Poojari Page 2 CPT Section C General Economics Chapter 2 Unit 1 CA. Shweta Poojari MCQ’s Page 3 CPT Section C General Economics Chapter 2 Unit 1 CA. Shweta Poojari MCQ’s A) Varies Directly with price B)Varies proportionately with price C)Varies Inversely with Price D) Is Independent of price Ans : C Therefore, Qty demanded Varies Inversely with Price Page 4 CPT Section C General Economics Chapter 2 Unit 1 CA. Shweta Poojari MCQ’s A) Varies Directly with price B)Varies proportionately with price C)Varies Inversely with Price D) Is Independent of price Ans : C Therefore, Qty demanded Varies Inversely with Price A) Normal Goods B)Luxury Goods C)Inferior Goods D)Substitute goods Ans : C Page 5 CPT Section C General Economics Chapter 2 Unit 1 CA. Shweta Poojari MCQ’s A) Varies Directly with price B)Varies proportionately with price C)Varies Inversely with Price D) Is Independent of price Ans : C Therefore, Qty demanded Varies Inversely with Price A) Normal Goods B)Luxury Goods C)Inferior Goods D)Substitute goods Ans : C Therefore, When Income rises Demand for inferior goods will decrease. Because consumer will shift his surplus income in buying superior commodities rather than consume more of inferior goods.Read More
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FAQs on MCQ - Law of Demand and Elasticity of Demand - Business Economics for CA Foundation
| 1. What is the law of demand? |  |
Ans. The law of demand states that the quantity demanded of a good or service varies inversely with its price, ceteris paribus. This means that as the price of a good or service increases, the quantity demanded of it decreases, and vice versa.
| 2. What factors affect the elasticity of demand? | |
Ans. The elasticity of demand is affected by several factors, including the availability of substitutes, the proportion of income spent on the good or service, the necessity of the good or service, and the time period under consideration. Generally, goods and services with close substitutes, a higher proportion of income spent on them, and those that are less necessary tend to have a higher elasticity of demand.
| 3. How does the law of demand relate to consumer behavior? | |
Ans. The law of demand is a fundamental principle of consumer behavior. It explains the behavior of consumers in response to changes in the price of a good or service. Consumers tend to buy more of a good or service when its price is low and less when its price is high. This behavior is driven by the desire to maximize utility or satisfaction while minimizing costs.
| 4. What is the difference between price elasticity of demand and income elasticity of demand? | |
Ans. Price elasticity of demand measures the responsiveness of the quantity demanded of a good or service to changes in its price, ceteris paribus. Income elasticity of demand measures the responsiveness of the quantity demanded of a good or service to changes in income, ceteris paribus. Price elasticity of demand is negative, while income elasticity of demand can be positive or negative.
| 5. How can businesses use elasticity of demand to set prices? | |
Ans. Businesses can use elasticity of demand to set prices by understanding the responsiveness of consumers to changes in price. If a good or service has a high elasticity of demand, a business may need to lower its price to attract customers. If a good or service has a low elasticity of demand, a business may be able to raise its price without losing customers. In general, businesses should aim to set prices that maximize profits, taking into account the elasticity of demand and other factors such as production costs and competition.
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