Economics Chapter 2

Suppose a consumer’s income increases from Rs. 30,000 to Rs. 36,000. As a result, the consumer increases her purchases of compact discs (CDs) from 25 CDs to 30 CDs. What is the consumer’s income elasticity of demand for CDs? (Use Arc Elasticity Method)

• 0.5

• 1

• 1.5

• 2

What is the characteristic feature of unit-elastic supply?

• The coefficient of elasticity is zero.

• The percentage change in quantity supplied is equal to the percentage change in price.

• The quantity supplied remains constant regardless of changes in price.

• The coefficient of elasticity is greater than one.

What does it mean when the elasticity of supply is greater than one, indicating a relatively elastic supply?

• The percentage change in quantity supplied is less than the percentage change in price.

• The percentage change in quantity supplied is equal to the percentage change in price.

• The percentage change in quantity supplied is greater than the percentage change in price.

• The quantity supplied remains constant regardless of changes in price.

What is the total market quantity demanded at a price of $6?

• 25 units

• 27 units

• 30 units

• 35 units

What does effective demand in economics depend on?

• Desire only

• Desire and willingness to pay

• Desire, means to purchase, and willingness to pay

• Means to purchase only

In the given demand function Qx = f(PX, Y, Pr), what does the symbol Qx represent?

• Price of the commodity

• Quantity demanded of product X

• Money income of the consumer

• Price of related goods

In Economics, when the demand for a commodity decreases with a rise in its price, it is known as:

• Contraction of demand

• Expansion of demand

• No change in demand

• None of the above

What is the relationship between the price of a commodity and its demand, according to the text?

• Directly proportional

• Inversely proportional

• No relationship

• Unpredictable

What psychological effect is described where individuals tend to do the same as others without having their own beliefs and thinking, leading to an increase in the demand for a particular commodity?

• Substitution Effect

• Bandwagon Effect

• Income Effect

• Veblen Effect

Who is credited with propounding the concept of consumer surplus?

• Adam Smith

• John Maynard Keynes

• Alfred Marshall

• Milton Friedman