Demand
- One mark questions:
1)Define Inferior good.
Ans: Inferior goods are those goods whoes demand falls with the rise in the income of consumer.
2)Define market demand for a commodity
Ans: It is aggregate demand of a commodity by all the consumers in the market.
3)When does a change in demand take place?
Ans: When other factors changes except the price of the commodity concerned.
4)When demand for a good falls due to rise in its own price, what is the change in demand called?
Ans: Contraction in demand.
5)When is a good called a normal good?
Ans: In which law of demand operates.
6)What economic measure can the government take to reduce demand for a commodity X which is harmful for health?
Ans: Imposition of taxes.
7)If P.e= 1, what will be the nature of its demand curve?
Ans: unitary elastic demand
8)What will be P.e on any two points of demand curve which is parallel to x axis
Ans. Equal
9)Price of a good X rises from Rs 20 per unit to Rs 40 per unit. The consumer buys the same quantity, he bought at Rs 20 per unit. What would be the price elasticity of demand?
Ans: 0
10)Give formula to measure P.e by percentage method.
Ans: P.e = percentage change in quantity dd/ percentage change in price.
- Three marks questions
1)Mention any three factors that affect the price elasticity of demand for the commodity.
2) Distinguish between Expansion in demand and increase in demand of a commodity.
Basis Expansion in demand increase in demand
Meaning When the quantity demand Increase in demand rises due to fall in the price of refers to a rise in the the commodity, keeping other demand of a commodity factors constant, it is known as caused due to any factor
Expansion in demand other than the own price
of the commodity.
Tabular Price(Rs) Demand(units Price(Rs) Demand(units)
Presentation
12. 100 12. 100
10 150 12 150
Effect on There is downward movement There is rightward shift demand curve along the same demand curve of demand curve.
Reason is occurs due to a decrease It is occurs due to in the price of the given favourable change in the commodity other factor, like increase in price of substitute goods, increase in income of the consumer etc.
2)Give three reasons of a rightward shift of a demand curve.
3)Why is demand curve of a commodity negatively sloped? Explain briefly.
4)How will an increase in price of coffee affect the demand for tea?
5)What happens to demand of an inferior good when consumers income changes?
6)When the price of a commodity falls by 1 rupee per unit, its quantity demanded rises by 3 units, if P.e = -2, calculate its quantity demanded if price before change was 10 per unit.
Ans: 15 units
7)“X & Y” are substitute goods. Explain the effect of fall in the price of X on the demand of Y.
- Four marks questions
1)Explain with the help of diagrams the effect of following changes on the demand of the commodity.
- A fall in the price of related good
- Rise in the income of the consumer.
2)How does change in price of a complementary good affect the demand of given good?
3)Distinguish between individual demand and market demand.
4)How does the nature of commodity influence its price elasticity of demand?
5)When price of a good falls from Rs 15 per unit to Rs12 per unit, its demand rises by 25%. Calculate P.e ?
Ans: 1.25
6)Government introduces a new tax on the production of cigarettes causing hike in their prices. What impact it will have on different sets of consumers?
Ans: Since cigerattes smoking is injurious to health, government has imposed this tax with a view to discourage the demand of cigarettes of consumers. However the impact of this tax would be different on different sets of consumers.
Demand would fall for those consumers whose demand for cigarettes is elastic.
Demand would not change for those consumers whose demand for it is inelastic.
7)Subsidies on medicines have been withdrawn, does making them costlier. How will it affect market demand?
Ans: Impact of subsidies is that the price of the commodity reduces. Withdrawal of subsidies will cause the price of medicines to rise.
Market demand will not be affected by this rise in the price as demand for medicines is perfectly inelastic.
8)Explainanyfourfactorsthataffectpriceelasticityofdemand.
Ans.1.NatureofCommodity:NecessarieslikeSalt,Kerosene oil etc. have inelastic demand and luxuries have elastic demand.
2.Availabilityofsubstitutes:Demandforgoodswhichhaveclose substitutes is relatively more elastic and goods without close substitutes have less elastic demand.
3.Differentuses:Commoditiesthatcanbeputtodifferent use have elastic demand for instance electricity has different uses.
4.Habitoftheconsumer:Goodstowhichconsumersbecome habitual will have inelastic demand.
Examples–LiquorandCigarette.
9)List any four causes of leftward shift of demand curve of a commodity. Explain any two.
10) Explain any four determinants of demand for a commodity.
Ans:- Following are the three determinants of demand for a commodity.
i) Price of the commodity:-When the price of a commodity increases the demand for that commodity decreases and vice versa. ii) Income of the consumer:- When the income increases the demand for normal commodity also increases and vice-versa.
iii) Price of related goods :-
a)In complementary goods demand rises with fall in price of complementary goods.
b)In substitute goods demand for a commodity falls with a fall in the price of other substitute goods
b)Taste & preference of the consumer: With favourable taste, demand increase and unfavourable taste demand decreases for a commodity. Q4. Explain any four factors that affect elasticity of demand.