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Demand and Supply MCQs | Demand and Supply Multiple Choice Questions with Answers

Questions
1 Normally a demand curve will have the shape:
A Horizontal
B Vertical
C Downward sloping
D Upward sloping

Answer: Downward sloping
2 Which one is the assumption of law of demand?
A Price of the commodity should not change
B Quantity demanded should not change
C Prices of substitutes should not change
D Demand curve must be linear

Answer: Prices of substitutes should not change
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3 The elasticity of demand of durable goods is:
A Less than unity
B Greater than unity
C Equal to unity
D Zero

Answer: Greater than unity
4 Which among the following statement is INCORRECT?
A On a linear demand curve, all the five forms of elasticity can be depicted’
B If two demand curves are linear and intersecting each other then coefficient of elasticity would be same on different demand curves at the point of intersection.
C If two demand curves are linear, and parallel to each other then at a particular price the coefficient of elasticity would be different on different demand curves
D The price elasticity of demand is expressed in terms of relative not absolute, changes in Price and quantity demanded’

Answer: If two demand curves are linear and intersecting each other then coefficient of elasticity would be same on different demand curves at the point of intersection.
5 The horizontal demand curve parallel to x-axis implies that the elasticity of demand is:
A Zero
B Infinite
C Equal to one
D Greater than zero but less than infinity

Answer: Infinite
6 In the short run, when the output of a firm increases, its average fixed cost:
A Remains constant
B Decreases
C Increases
D First decreases and then rises

Answer: Decreases
7 What is meant by Autarky in international trade?
A Monopoly in international trade
B Imposition of restrictions in international trade
C Removal of all restrictions from international trade
D The idea of self sufficiency and no international trade by a country

Answer: The idea of self sufficiency and no international trade by a country
8 Cost push inflation occurs because of:
A Wage push
B Profit push
C Both A and B
D Ineffective policies of the government

Answer: Both A and B
9 Terms of trade that relate to the Real Ratio of international exchange between commodities is called:
A Real cost terms of trade
B Commodity terms of trade
C Income terms of trade
D Utility terms of trade

Answer: Income terms of trade
10 The new world Trade organization (WTO), which replaced the GATT came into effect from____
A 1ST January 1991
B 1st January 1995
C 1st April 1994
D 1st May 1995

Answer: 1st January 1995
11 For measuring the changes in the price level of the country, which among the following index number is used
A Cost of living index number
B Production index number
C Security Price index number
D Whole sale price index number

Answer: Whole sale price index number
12 Under free exchange markets the rate of foreign exchange is determined by:
A Balance of Payments theory
B Mint par theory
C Purchasing power parity theory
D None of the above

Answer: Balance of Payments theory
13 When demand is perfectly inelastic, an increase in price will result in:
A A decrease in total revenue
B An increase in total revenue
C No change in total revenue
D A decrease in quantity demanded

Answer: An increase in total revenue
14 Other things equal, if a good has more substitutes, its price elasticity of demand is:
A Larger
B Smaller
C Zero
D Unity

Answer: Larger
15 If elasticity of demand is very low it shows that the commodity is:
A A necessity
B A luxury
C Has little importance in total budget
D (a) and (c) above

Answer: A necessity
16 If demand is unitary elastic, a 25% increases in price will result in:
A 25% change in total revenue
B No change in quantity demanded
C 1% decrease in quantity demanded
D 25% decrease in quantity demanded

Answer: 25% decrease in quantity demanded
17 Which of the following is a demand function?
A Q + 4P = 20
B Q = 35 + 3P
C Q - 2P - 15 = 0
D 5P - Q = 4

Answer: Q + 4P = 20
18 Mr. Raees Ahmad bought 50 litres of petrol when his monthly income was Rs. 25,000. Now his monthly income has risen to Rs. 50,000 and he purchases 100 litre of petrol. His income elasticity of demand for petrol is:
A 1
B 100%
C Less than one
D More than one

Answer: 1
19 Demand for a commodity refers to:
A Need for the commodity
B Desire for the commodity
C Amount of the commodity demanded at a particular price and at a particular time
D Quantity demanded of that commodity

Answer: Amount of the commodity demanded at a particular price and at a particular time
20 If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to:
A Increase
B Decrease
C Remain the same
D Become zero

Answer: Increase

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