Critical Thinking Questions: Elementary Theory of Demand

Table of Contents
1. Type I
2. Type II
3. Type III
4. Type IV
5. Type V
6. Type VI
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Type I

Q1: Which of the following combinations correctly represents demand for a commodity?
(a) Desire to buy + low price
(b) Purchasing power + availability
(c) Desire to buy + purchasing power + willingness to pay
(d) Willingness to buy + future expectation

Q2: Market demand for a commodity is best described as:
(a) Demand of the richest consumer
(b) Demand of a single household
(c) Horizontal sum of individual demands
(d) Average demand of consumers

Q3: According to the Law of Demand, if the price of a commodity rises, then:
(a) Demand always increases
(b) Quantity demanded decreases, ceteris paribus
(c) Demand curve shifts rightward
(d) Market demand becomes vertical

Type II

Q4: Which of the following factors influence individual demand?
A. Price of the commodity
B. Consumer's income
C. Income distribution
D. Tastes and preferences
(a) A, B and D
(b) A and C only
(c) B and C only
(d) C and D only

Q5: Identify the correct statements related to market demand:
A. It depends on population size
B. It depends on income distribution
C. It is independent of climate
D. It is the sum of individual demands
(a) A and D
(b) B and C
(c) A, B and D
(d) C and D

Q6: Which of the following are assumptions of the Law of Demand?
A. Consumer income remains constant
B. Prices of related goods change
C. Tastes remain unchanged
D. No future price expectations
(a) A, C and D
(b) B and C only
(c) A and B only
(d) B, C and D

Type III

Analogy Based

Q7: Price ↓ : Quantity Demanded ↑ : :
(a) Income ↑ : Demand ↓
(b) Price ↑ : Demand ↑
(c) Price ↑ : Quantity Demanded ↓
(d) Income ↓ : Quantity Demanded ↑

Q8: Tea and Coffee : Competitive Demand : : Car and Petrol :
(a) Derived demand
(b) Composite demand
(c) Joint demand
(d) Direct demand

Q9: Income Demand : Change in income : : Cross Demand :
(a) Change in taste
(b) Change in population
(c) Change in price of related goods
(d) Change in own price

Type IV

Assertion-Reason

Q10: (A) The demand curve slopes downward from left to right.
(B) Marginal utility decreases as consumption increases.
(a) (B) contradicts (A)
(b) (B) is the reason for (A)
(c) (A) is true but (B) is false
(d) (A) and (B) are independent

Q11: (A) A fall in the price of a commodity causes an increase in quantity demanded.
(B) This change is shown by a rightward shift of the demand curve.
(a) (B) contradicts (A)
(b) (B) is the reason for (A)
(c) (A) is true but (B) is false
(d) (A) and (B) are independent

Q12: (A) Market demand curve is obtained by vertical summation of individual demand curves.
(B) Market demand curve shows total demand at different prices.
(a) (B) contradicts (A)
(b) (B) is the reason for (A)
(c) (A) is true but (B) is false
(d) (A) and (B) are independent

Type V

Application-Based

Q13: Due to heavy advertising, consumers start buying more of a product at the same price. This results in:
(a) Extension of demand
(b) Contraction of demand
(c) Increase in demand (rightward shift)
(d) Decrease in demand (leftward shift)

Q14: The price of butter rises, causing an increase in the demand for margarine. This is an example of:
(a) Joint demand
(b) Composite demand
(c) Cross demand
(d) Derived demand

Q15: During winter, the demand for woollen clothes increases even if prices remain unchanged. This represents:
(a) Change in quantity demanded
(b) Extension of demand
(c) Increase in demand due to climate
(d) Giffen effect

Type VI

Odd One Out / Incorrect Statement

Q16: Identify the odd one out related to types of demand:
(a) Joint demand
(b) Composite demand
(c) Derived demand
(d) Elastic demand

Q17: Which of the following is not an exception to the Law of Demand?
(a) Giffen goods
(b) Bandwagon effect
(c) Normal goods
(d) Speculative demand

Q18: Identify the incorrect statement about change in quantity demanded:
(a) Caused by change in price
(b) Shown by movement along demand curve
(c) Results in shift of demand curve
(d) Includes extension and contraction

Q19: Which factor causes a leftward shift of the demand curve for a normal good?
(a) Rise in consumer income
(b) Fall in price of substitute
(c) Rise in price of complementary good
(d) Increase in population

Q20: Which statement about the Giffen effect is incorrect?
(a) It applies to inferior goods
(b) Price rise leads to higher demand
(c) It applies to luxury goods
(d) It violates the Law of Demand