Reason Based Questions - Theory Of Demand - Commerce PDF Download

Reason Based Question’s

(Q1) Give True or False with reason    (C) 2011

(a) If the Goods X and Y are substitutes , a rise in price of X will result in a rightward shift in demand curve 

(b) The demand for commodity always increases with increase in the price of other goods

(c) The demand for good increases with the increase in the income of its buyer 

Ans: T , F , F 

(Q2) Giffen goods must be inferior goods, while inferior goods, may or may not be Giffen goods.
Ans: Yes

(Q3)  law of demand need not necessarily fail in case of inferior goods ?    Ans ::  Yes

(Q4) Increase in demand refers to extension of demand.
Ans: False.

(Q5) In case of Giffen goods, income effect is higher that the substitution effect.

Ans: True

(Q6) An increase in the price of milk would result I an increase in the demand for tea

Ans:  False ::  Milk and tea are complementary goods.  An increase in price of milk would make tea costlier.  Hence, the demand for tea may fall.

(Q7) Law of demand does not hold true when the prices are expected to go up further.

Ans: True

(Q8) All Giffen goods are inferior goods, but all inferior goods are not Giffen goods.

Ans: True 

(Q9) Demand means quantity of a commodity which a consumer is ready to buy.

Ans:  False : because demand refers to quantity of a commodity which a consumer is ready to buy at different prices in a given period of time.

(Q10) In case of giffen goods, income effect is higher than the substitution effect.

Ans: True 

(Q11) Giving reasons, state if the following statements are true or false :

(a) An increase in the price of Coke would result in decrease in the demand for Pepsi.

(b) An increase in the price of sugar would result in an increase in the demand for tea.

(c) An increase in the income of a consumer would result in an increase in demand for all types of good that are demanded by a consumer.  

Ans:  F, F , F 

(Q12) Increase in the price of bread will also increase the demand for butter.
Ans: False.

(Q13) When a rise in the income of the consumer leads to a fall in demand for Good-X ,     Good-X must be an inferior good. 
Ans: True.

(Q14)  In case of inferior goods, law of demand fails only when negative income effect is lower than the substitution effect.
Ans: False

(Q15) Slope of demand curve for normal goods is upward sloping.      
Ans:  False 

(Q16) Increase in price of bulbs will shift its demand curve towards let.
Ans: False 

(Q17)  Demand of a given commodity can be specified irrespective of its price.
Ans: F 

(Q18)  Due to fall in cost of making bicycles, its price has reduced.  It will shift the demand curve of bicycles towards right.

Ans: False.  Fall in price of given commodity (bicycles) will lead to downward movement along the same demand curve.

(Q19)  Cross price effect occurs in case of substitute goods only. 
Ans: F 

(Q20) Market demand curve is obtained by vertical summation of individual demand curves.

Ans: False.  Market demand curve is obtained by horizontal summation of individual demand curves.

(Q21) Due to increase in one more member, the family expenditure on milk increased.  It is an example of extension in demand. 
Ans: F

(Q22)  The demand curve of a commodity may not obey the law of demand if price of its substitute rises. 
Ans:  T

(Q23)  In case of giffen goods, demand curve slope upward.
Ans: T

(Q24) The exceptions to the law of demand may be true for an individual but not for the whole market.

Ans: True .  Exception to the law may be true in case of certain individuals, but for the whole market, law of demand is applicable, assuming the normal conditions and assumptions.

(Q25) ‘A consumer has same marginal utility curve and demand curve’. Comment.

Ans:  Yes , because bothe curves have inverse relation between the amount of a good and price as well as with marginal utility.

(Q26) (a) With a fall in price, demand for the good rises and it is contraction in demand.

(b)  Law of demand explains quantitative relationship between price and demand.

(c) Demand for a commodity refers to the entire demand schedule.

(d) Individual demand is a concept related to microeconomics, while market demand is a concept related to macroeconomics.

(e)  If disposable income of the people rises, their demand curve for butter may not obey the law of demand.

Ans: F , F , T , F, F