CBSE Class 12 Economics Theory of Consumer Behaviour MCQs Set E

Question: On a straight-line downward sloping demand curve, the maximum elasticity of demand occurs at
a) Vertical intercept of demand curve
b) Horizontal intercept of demand curve
c) At the midpoint of demand curve
d) On both vertical and horizontal intercepts
Answer: b

Question: If the price elasticity of demand ranges between 0 to 1, demand is
a) Inelastic
b) Elastic
c) Perfectly elastic
d) Unit elastic
Answer: a

Question: The price elasticity of demand is 2, then a 10 per cent increase in the price results in a ………….. decrease in its quantity demanded.
a) 5%
b) 10%
c) 20%
d) 25%
Answer: c

Question: Which of the below statements is true about elasticity of demand?
a) The units used to measure price but not to measure quantity
b) The units used to measure price as well as quantity
c) The units used to measure quantity but not to measure price
d) Neither the units used to measure price nor the units used to measure quantity
Answer: d

Question: Demand is same as wants of a consumer.
a) True
b) False
c) Partially true
d) Incomplete statement
Answer: b

Question: Law of demand is an ………… approach.
a) Qualitative
b) Quantitative
c) Both (a) and (b)
d) Neither (a) nor (b)
Answer: a

Question: Demand for a good depends on which of the following factors?
a) Willingness to pay
b) Ability to pay
c) Price of the good
d) All of these
Answer: d

Question: If a consumer spends larger proportion of his income on a good, its demand will be
a) Elastic
b) Inelastic
c) Unit elastic
d) Cannot be defined
Answer: a

Question: Elasticity of demand and slope of demand curve are inversely related.
a) True
b) False
c) Partially true
d) Incomplete statement
Answer: a

Question: Of the given goods below, demand is expected to be inelastic for
a) Alcohol
b) Car
c) Uniform
d) Pizza
Answer: c

Question: A good can be normal for one person and inferior for the other person at the same time.
a) True
b) False
c) Partially true
d) Incomplete statement
Answer: a

Question: In case of inferior goods like bajra, a fall in its price tends to
a) Make the demand remain constant
b) Reduce the demand
c) Increase the demand
d) Change the demand in an abnormal way
Answer: c

Question: All of these are a cause of shift in demand except
a) Change in income
b) Change in price
c) Change in fashion
d) Change in price of substitute goods
Answer: b

Question: What is the elasticity of demand on a rectangular hyperbola shaped demand curve?
a) Perfectly elastic demand
b) Perfectly inelastic demand
c) Unitary elastic demand
d) Elastic demand
Answer: c

Question: Which of the following is/are components of change in demand?
(i) Increase in demand
(ii) Decrease in demand
(iii) Contraction in demand
(iv) Expansion in demand
Choose from the options below.
(a) (i) and (iii)
(b) (ii) and (iv)
(c) (i) and (ii)
(d) (iii) and (iv)
Answer: c

Question: Which of the following statements is/are not true about elasticity of demand?
(i) Demand curve for a perfectly elastic demand is horizontal line parallel to X-axis.
(ii) Demand curve for a perfectly inelastic demand is vertical line parallel to Y-axis.
(iii) Demand for luxury goods is highly elastic.
(a) (i) and (ii)
(b) (ii) and (iii)
(c) (i) and (iii)
(d) Only (iii)
Answer: d

Question: Which of the below statements is/are true?
(i) Price elasticity of demand for normal goods is higher than inferior goods.
(ii) Elasticity of demand for giffen goods is perfectly elastic.
(iii) Liner demand curve has higher elasticity of demand as compared to non-linear demand curve.
Choose from the options below.
(a) (i) and (ii)
(b) (ii) and (iii)
(c) (i) and (iii)
(d) Only (i)
Answer: d

Question: Which of the following factors causes demand curve to be downward sloping?
(i) Law of DMU
(ii) Substitution effect
(iii) Income effect
(iv) Number of uses of a good
(v) Number of buyers in the market
Choose from the options below.
(a) (i), (ii), (iii) and (v)
(b) (i), (ii), (iv) and (v)
(c) (ii), (iii), (iv) and (v)
(d) (i), (ii), (iii), (iv) and (v)
Answer: d

Question: Which of the following is/are components of change in quantity demanded?
(i) Increase in demand
(ii) Decrease in demand
(iii) Contraction in demand
(iv) Expansion in demand
Choose from the options below.
(a) (i) and (iii)
(b) (ii) and (iv)
(c) (i) and (ii)
(d) (iii) and (iv)
Answer: d

Case Based MCQ 

Direction Read the following case study and answer questions on the basis of the same.

Salt has no close substitute and moreover, a household has to share a negligible part of his entire budget. Therefore, even in spite of increase in price of salt, its demand will not be affected.
However, demand for a particular brand of toothpaste is comparatively more elastic as there are many brands of toothpaste available in the market, so the consumers can switch over to any other brand in case of hike in the price of a particular brand of toothpaste.

Question: Which of the following is not a determinant of elasticity of demand?
a) Availability of substitutes
b) Nature of the good
c) Number of buyers in the market
d) Expenditure on a commodity
Answer: c

Question: The elasticity of demand of salt is …… .
a) Elastic
b) Inelastic
c) Perfectly elastic
d) Perfectly inelastic
Answer: b

Question: Assertion (A) Any good which has inelastic demand must be necessity of life.
Reason (R) Elastic goods are highly price sensitive in nature as compared to inelastic goods.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is true, but Reason (R) is false
d) Assertion (A) is false, but Reason (R) is true
Answer: d

Question: Why demand for toothpaste is elastic in nature?
a) It is not a necessity of life
b) It has a competitive market
c) Consumer has a preference for it
d) All of the above
Answer: b

Question: ……… makes demand for salt inelastic.
a) Necessity
b) Non-availability of substitute
c) Both (a) and (b)
d) None of the above
Answer: c

Direction Read the following case study and answer questions on the basis of the same.

Demand for gold is widespread observable fact around the world, in which India’s share alone comes to around 25%.
Hutti gold mine company located in Karnataka is the only company in India which produces gold by mining and processing the gold ore. Over the past 5 years; Indians have recycled an average of 105 tons of gold per annum.
In October, 2008, demand for gold increased; celebrations like Diwali and Akshaya Tritiya was the main factor for this vast increase in demand.
Imports of gold started falling from December, 2008 by 83%, followed by 91% in January, 2009. In March, 2009 imports were zero.
In 2010, demand went up and the price also went up. Indian people tend to invest in gold because of culture and belief, so the demand always remains elastic.
In 2011, Indians enjoyed a rapid increase in income, which made the Indians to consume more and more gold even though the price was increasing.
Certain non-price factors like income of the consumer, prices of related goods, consumers taste and preferences, population and expected future price of the good also effects the increase in the price of gold.
Later on, in the year 2012, platinum, which is a substitute good for gold started declining from ` 35,000 to ` 22,000 which made the people of India to purchase platinum as a substitute good for gold.

Question: What is the nature of demand curve for gold in Indian market?
a) Upward sloping
b) Downward sloping
c) Horizontal line parallel to X-axis
d) Vertical line parallel to Y-axis
Answer: a

Question: What will be the impact on demand curve for gold jewellery if government imposes heavy tariff on import of gold?
a) Movement upwards
b) Movement downwards
c) Shifts to the right
d) Shifts to the left
Answer: d

Question: In spite of recent pandemic ‘COVID-19’, the demand for gold in Indian market remained ……….. .
a) high
b) low
c) constant
d) Either (a) or (b)
Answer: a

Question: What are the various determinants of gold price in India except its own price?
a) Income of consumer
b) Price of related goods
c) Taste and preferences
d) All of the above
Answer: c

Question: Assertion (A) Constant demand for gold during pandemic shows the strong preference of Indians for gold.
Reason (R) Gold is demanded in India both for investment and jewellery purposes.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is true, but Reason (R) is false
d) Assertion (A) is false, but Reason (R) is true
Answer: a