#1
Which of the following is NOT a determinant of demand?
Cost of production for firms
ExplanationFactors affecting supply, not demand.
#2
When the price of a good increases, what happens to its quantity demanded, according to the law of demand?
Decreases
ExplanationInverse relationship as per the law of demand.
#3
Which of the following is the correct formula for price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationStandard formula measuring responsiveness of quantity demanded to price changes.
#4
If the cross-price elasticity of demand for two goods is positive, it means that:
The two goods are substitutes
ExplanationDirect relationship indicates substitutability.
#5
Which of the following best describes the income effect in economics?
The change in quantity demanded due to a change in income
ExplanationImpact on demand resulting from alterations in consumer income.
#6
What happens to the demand curve for a normal good when income increases?
It shifts to the right
ExplanationPositive relationship between income and demand.
#7
What is the primary assumption made about consumer behavior in the theory of consumer choice?
Consumers always maximize utility
ExplanationRational decision-making aimed at optimizing satisfaction.
#8
Which of the following is an example of a normal good?
Luxury cars
ExplanationDemand increases with rising income.
#9
What is the significance of a Giffen good in economics?
It violates the law of demand
ExplanationDefies typical demand behavior by having a positive price-quantity relationship.
#10
Which of the following is a characteristic of a perfectly elastic demand curve?
The price elasticity of demand is infinity
ExplanationAny price change leads to infinite quantity change.
#11
What does it mean if the price elasticity of demand for a good is inelastic?
Consumers are not very responsive to price changes
ExplanationQuantity demanded remains relatively unaffected by price changes.
#12
If the price elasticity of demand for a good is unitary elastic, what happens to total revenue when the price decreases?
Total revenue remains unchanged
ExplanationProportionate price and quantity changes maintain total revenue.
#13
Which of the following is true about a Veblen good?
The demand for a Veblen good increases as its price increases
ExplanationPrestige or luxury goods where higher prices enhance desirability.
#14
In economics, what is the significance of the concept of consumer surplus?
It represents the difference between the maximum price a consumer is willing to pay and the price they actually pay
ExplanationMeasure of consumer benefit from market transactions.