Supply and Demand AFCAT Questions

AFCAT Indian Economy

Supply and Demand MCQ Questions


1.
According to the law of demand, when the price of a commodity falls while all other factors remain unchanged, what happens to its quantity demanded?
A.
It remains exactly the same
B.
It decreases
C.
It first falls and then rises
D.
It increases
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ANSWER :
D. It increases
2.
The law of demand describes the relationship between which two variables?
A.
Cost of production and the price of the commodity
B.
Income of the consumer and the price of the commodity
C.
Price of a commodity and the quantity demanded of that commodity
D.
Price of a commodity and the quantity supplied of that commodity
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ANSWER :
C. Price of a commodity and the quantity demanded of that commodity
3.
Which condition must hold for the law of demand to be valid?
A.
Consumer income must be rising continuously
B.
The supply of the commodity must also increase
C.
The commodity must be a luxury good
D.
Other determinants of demand, such as income, tastes and prices of related goods, must remain constant (ceteris paribus)
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ANSWER :
D. Other determinants of demand, such as income, tastes and prices of related goods, must remain constant (ceteris paribus)
4.
Which principle best explains why a typical demand curve slopes downward from left to right?
A.
The law of diminishing returns
B.
The law of supply
C.
The law of diminishing marginal utility
D.
The law of variable proportions
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ANSWER :
C. The law of diminishing marginal utility
5.
Giffen goods are considered an exception to the law of demand because:
A.
Their quantity demanded rises faster than the fall in price
B.
They have no substitutes available in the market
C.
Their supply is perfectly inelastic
D.
Their quantity demanded falls when their price falls, due to a strong negative income effect
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ANSWER :
D. Their quantity demanded falls when their price falls, due to a strong negative income effect
6.
Veblen goods (goods bought for status or conspicuous consumption) violate the law of demand because:
A.
A lower price reduces the quality of the good
B.
Their supply curve is downward sloping
C.
They are always inferior goods
D.
A higher price can make the good more desirable, raising rather than lowering its quantity demanded
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ANSWER :
D. A higher price can make the good more desirable, raising rather than lowering its quantity demanded