VERY SHORT ANSWER TYPE QUESTIONS
1. What is meant by demand?
Ans: It’s the quantity of a good or service that consumers are willing and able to buy at various prices within a specific time.
2. Name any four determinants of demand.
Ans: Income, price of related goods, consumer preferences, and expectations about the future.
3. State the law of demand.
Ans: When the price of a good rises, the quantity demanded decreases, and vice versa, assuming other factors remain constant.
4. Define a normal good.
Ans: : A good for which demand increases as consumer income rises.
5. What is a inferior good?
Ans: A good for which demand decreases as consumer income rises.
6. Define complementary goods.
Ans: Items that are typically used together, where the increase in demand for one leads to an increase in demand for the other (e.g., cars and fuel).
7. Define substitute goods.
Ans: Goods that can be used in place of each other, so an increase in the price of one leads to an increase in demand for the other (e.g., tea and coffee).
8. Define a demand schedule.
Ans: A table showing the relationship between the price of a good and the quantity demanded.
9. What is extension in demand?
Ans: When the price falls and consumers want to buy more of a product.
10. Define contraction in demand.
Ans: When the price rises and consumers want to buy less of a product.
11. What is increase in demand?
Ans: When factors other than price lead consumers to buy more of a product at every price.
12. What is decrease in demand?
Ans: When factors other than price lead consumers to buy less of a product at every price.
13. What are the causes of increase in demand?
Ans: Factors like rising income, popularity, changes in preferences, or expectations of future price increases.
14. What are the causes of decrease in demand?
Ans: Factors like decreasing income, a shift in preferences, or anticipation of lower prices in the future.
15. What is shift in demand curve?
Ans: When factors other than price change, causing a new demand curve to form.
16. Define supply.
Ans: The quantity of a good or service that producers are willing to offer at various prices.
17. What is supply schedule?
Ans: A table showing the relationship between the price of a good and the quantity supplied.
18. What is extension in supply?
Ans: When producers are willing to supply more at a higher price.
19. What is contraction in supply?
Ans: When producers are willing to supply less at a lower price.
20. Define increase in supply.
Ans: When factors other than price lead producers to offer more of a product at every price.
21. Define decrease in supply.
Ans: When factors other than price lead producers to offer less of a product at every price.
22. State the law of supply.
Ans: As the price of a good rises, the quantity supplied also rises, assuming other factors remain constant.
23. What are the causes of increase in supply?
Ans: Factors like technological advancements, lower production costs, or favorable government policies.
24. What are the causes of decrease in supply?
Ans: Factors like natural disasters, increased production costs, or government regulations restricting production.
25. Define shift in supply curve.
Ans: When factors other than price change, causing a new supply curve to form.
26. What is equilibrium price?
Ans:The price where quantity demanded equals quantity supplied.
27. Define the surplus and shortage.
Ans: Surplus occurs when the quantity supplied exceeds the quantity demanded at a given price, while shortage occurs when the quantity demanded exceeds the quantity supplied at a given price.
SHORT ANSWER TYPE QUESTIONS
1. What is meant by demand? What are its different types?
Ans: Demand refers to the desire and ability of consumers to purchase a particular good or service. There are various types of demand:
Price Demand: Reflects how the quantity demanded changes concerning price variations.
Income Demand: Illustrates how the quantity demanded changes with fluctuations in consumer income.
Cross Demand: Examines how the quantity demanded of one good changes with alterations in the price of another related good.
Composite Demand: Describes goods that serve multiple purposes, causing their demand to be influenced by various factors.
2. Explain any five determinants of demand.
Ans: Any five determinants of demand are:
Income: When consumers’ income increases, their purchasing power rises, leading to an increase in demand for normal goods.
Price of Related Goods: The demand for one good can be affected by the price changes in related goods. Substitutes might see an increase in demand if the price of another good rises (e.g., tea and coffee).
Consumer Preferences: Individual tastes and preferences significantly impact what consumers are willing to buy.
Expectations: Anticipations about future changes in prices or income can alter current demand.
Number of Buyers: An increase in the number of buyers generally leads to a higher demand for a product.
3. Explain the law of demand.
Ans: Law of Demand: This law affirms that when the price of a good or service decreases, the quantity demanded for it typically increases, assuming all other factors remain constant. Conversely, when prices rise, the quantity demanded usually decreases.
4. Why does a demand curve slope downward?
Ans: The downward slope of a demand curve represents the inverse relationship between price and quantity demanded. As the price of a product decreases, consumers are usually inclined to buy more of it, and vice versa.
5. Explain the concept of shift in demand curve.
Ans: Shift in the demand curve occurs when factors besides price influence the quantity demanded at every price point. For example, changes in consumer preferences or income can lead to a shift in the entire demand curve.
6. Distinguish between movement along a demand curve and shift in demand curve.
Ans:
| Movement Along the Curve | Shift in the Supply Curve |
| Reflects changes in quantity supplied due to price alterations, assuming other factors remain constant. | Results from factors other than price affecting the quantity supplied at every price. |
| Occurs along the existing supply curve. | Reflects a change in supply, not just quantity supplied. |
| Represents a change in quantity supplied, not supply itself. | Occurs due to changes in production costs, technology, government policies, expectations, or the number of sellers. |
7. What is supply? Explain its any five determinants.
Ans: Supply represents the quantity of a good or service that producers are willing to offer at different prices. Determinants of supply include:
Cost of Production: Higher production costs typically decrease supply.
Technology: Advancements in technology often lead to an increase in supply.
Number of Sellers: An increase in the number of sellers usually results in a higher supply.
Expectations: Future price expectations can influence the current supply of a product.
Government Policies: Regulations, subsidies, or taxes can significantly impact supply.
8. Explain the law of supply.
Ans: Law of Supply: This law states that as the price of a good increases, the quantity supplied by producers also increases, assuming all other factors remain constant.
9. Explain the concept of shift in supply curve.
Ans: Shift in the supply curve occurs due to factors other than price impacting the quantity supplied at every price point. For example, technological advancements can increase supply by making production more efficient.
10. Distinguish between movement along a supply curve and shift in supply curve.
Ans:
| Movement Along the Curve | Shift in the Supply Curve |
| Reflects changes in the quantity supplied due to variations in price, keeping other factors constant. | Results from factors besides price affecting the quantity supplied at every price level. |
| Occurs along the existing supply curve. | Reflects a change in the entire supply, not just the quantity supplied. |
| Represents a change in the quantity supplied, not the overall supply. | Occurs due to changes in production costs, technology, government policies, expectations, or the number of sellers, altering the entire supply curve. |
11. Explain any five factors causing the shift in supply curve.
Ans: Factors causing a shift in the supply curve:
Production Costs: Changes in the cost of materials, labor, or technology directly impact how much producers can supply.
Technological Advances: Improvements often increase efficiency, allowing producers to supply more at various price points.
Government Policies: Interventions like subsidies, taxes, or regulations can alter production costs, affecting the supply.
Expectations: Anticipations of future prices or market changes can influence current supply decisions.
Number of Sellers: Changes in the number of producers entering or leaving the market can affect overall supply.
12. What are the exceptions to the law of supply? Explain.
Ans: Exceptions to the law of supply can occur in cases where external factors strongly influence supply. For instance, agricultural goods heavily impacted by weather conditions or products with limited availability, like rare artworks, might not adhere strictly to the law of supply due to their unique market dynamics.
13. How is the equilibrium price determined? Explain.
Ans: The equilibrium price is determined at the point where quantity demanded equals quantity supplied, establishing a price at which the market is in balance. It’s where buyers and sellers mutually agree on a price, avoiding surplus or shortage.
LONG ANSWER TYPE QUESTIONS
1. Define demand. State and explain the law of demand.
Ans: Demand is the quantity of a good or service that consumers are willing and able to buy at various prices within a given period. The law of demand states that when the price of a good decreases, the quantity demanded for it increases, and vice versa, assuming other factors like income, preferences, and prices of related goods remain constant. This law showcases the inverse relationship between price and quantity demanded.
2. Explain the law of demand. Why does a demand curve slope downward?
Ans: The law of demand asserts that when the price of a product drops, consumers tend to buy more of it, and when the price rises, they tend to buy less.
The downward slope of the demand curve represents this relationship: as prices decrease, the quantity demanded increases, and as prices increase, the quantity demanded decreases.
3. What is meant by movement along a demand curve and shift in demand curve? Explain the factors causing shifts in the demand curve.
Ans: Movement along a demand curve occurs due to changes in the price of a product, leading to changes in the quantity demanded while keeping other factors constant. Shift in the demand curve occurs because of factors other than price, influencing the quantity demanded at every price point. Factors causing shifts include changes in consumer income, preferences, prices of related goods, population, or expectations.
4. Describe the main determinants of demand. Give an example of joint demand.
Ans: The primary determinants of demand include:
Income: Higher income usually leads to increased demand for most goods (normal goods).
Prices of Related Goods: Changes in the prices of substitutes or complements affect demand.
Consumer Preferences: Tastes and preferences significantly impact what consumers want to buy.
Number of Buyers: Changes in the number of consumers influence overall demand.
Expectations: Anticipations about future prices or income can also affect demand. An example of joint demand is cars and gasoline; an increase in the demand for cars raises the demand for gasoline to fuel those cars.
5. What is supply? State and explain the law of supply.
Ans: Supply refers to the quantity of a good or service that producers are willing to offer at different prices. The law of supply states that as the price of a good rises, the quantity supplied by producers also rises, assuming other factors remain constant. Conversely, as the price decreases, the quantity supplied decreases. This leads to an upward-sloping supply curve.
6. What is meant by shift in the supply curve? Explain its causes.
Ans: Shift in the supply curve occurs due to factors other than price affecting the quantity supplied at every price level. Causes include changes in production costs, technology, government policies, expectations, or the number of sellers, influencing the overall quantity supplied at various prices.
7. What is supply? Explain its determinants.
Ans: Supply refers to the quantity of a good or service that producers are willing to offer at different prices. The determinants of supply include:
Production Costs: Changes in the cost of raw materials, labor, or technology impact how much producers can supply.
Technology: Advancements often increase efficiency, allowing producers to supply more at different prices.
Government Policies: Interventions like subsidies or taxes can alter production costs, influencing supply.
Expectations: Producers’ anticipations of future prices or market conditions affect current supply decisions.
Number of Sellers: Changes in the number of producers entering or exiting the market affect overall supply.
