MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO CONSUMPTION: INDIFFERENCE CURVE, CONSUMER SURPLUS, ELASTICITY
Which of the following best describes consumer equilibrium?
A) The point where the consumer’s budget line intersects the production possibilities curve
B) The point where the consumer’s budget line is tangent to the highest attainable indifference curve
C) The point where the consumer’s budget line is tangent to the lowest attainable indifference curve
D) The point where the consumer’s budget line intersects the price axis
Answer: B) The point where the consumer’s budget line is tangent to the highest attainable indifference curve
In India, if the government imposes a quota on the import of smartphones, what is likely to happen to the demand for domestically produced smartphones?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly inelastic
Answer: A) The demand will increase
Which of the following factors does NOT influence the price elasticity of demand for a good?
A) Availability of close substitutes
B) Necessity or luxury status of the good
C) Time horizon for the decision
D) Government regulations on production
Answer: D) Government regulations on production
If the price elasticity of demand for a good is less than 1, the demand is considered to be:
A) Perfectly elastic
B) Inelastic
C) Unitary elastic
D) Perfectly inelastic
Answer: B) Inelastic
Suppose the price of tea increases by 10% and the quantity demanded decreases by 5%. What is the price elasticity of demand for tea?
A) 0.5
B) 1.0
C) 1.5
D) 2.0
Answer: A) 0.5
Which of the following is NOT a type of elasticity of demand?
A) Price elasticity of demand
B) Cross-price elasticity of demand
C) Income elasticity of demand
D) Market elasticity of demand
Answer: D) Market elasticity of demand
In India, if the government imposes a tax on luxury cars, what is likely to happen to the consumer surplus of luxury car consumers?
A) Increase
B) Decrease
C) Remain unchanged
D) Become perfectly elastic
Answer: B) Decrease
Which of the following statements is true regarding income elasticity of demand?
A) Income elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in income
B) Income elasticity of demand is always positive for inferior goods
C) Income elasticity of demand is negative for normal goods
D) Income elasticity of demand is used to measure the responsiveness of quantity demanded to changes in price
Answer: A) Income elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in income
If the cross-price elasticity of demand between two goods is positive, what can be said about the relationship between these goods?
A) They are substitutes
B) They are complements
C) They are unrelated
D) They are normal goods
Answer: A) They are substitutes
Which of the following statements is true regarding the relationship between price elasticity of demand and total revenue?
A) When demand is inelastic, a decrease in price increases total revenue
B) When demand is elastic, an increase in price increases total revenue
C) When demand is unitary elastic, a change in price has no effect on total revenue
D) When demand is perfectly elastic, any change in price results in zero total revenue
Answer: A) When demand is inelastic, a decrease in price increases total revenue
In India, if the government imposes a subsidy on solar panels, what is likely to happen to the consumer surplus of solar panel consumers?
A) Increase
B) Decrease
C) Remain unchanged
D) Become perfectly elastic
Answer: A) Increase
Which of the following statements is true regarding Veblen goods?
A) Demand for Veblen goods increases as income increases
B) Demand for Veblen goods decreases as price decreases
C) Demand for Veblen goods increases as price increases
D) Demand for Veblen goods is independent of price changes
Answer: C) Demand for Veblen goods increases as price increases
When the price of a good increases, what happens to the consumer surplus of consumers who are highly price-sensitive?
A) Increase
B) Decrease
C) Remain unchanged
D) Become perfectly elastic
Answer: B) Decrease
Which of the following is NOT a characteristic of an inferior good?
A) Demand decreases as income increases
B) Demand increases as income decreases
C) Demand is inversely related to price
D) Demand is less sensitive to price changes
Answer: C) Demand is inversely related to price
If the price of a good increases and the total revenue decreases, what can be said about the price elasticity of demand?
A) Elastic
B) Inelastic
C) Unitary elastic
D) Perfectly inelastic
Answer: A) Elastic
In India, if the price of gold increases due to international market trends, what is likely to happen to the demand for gold jewelry?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly inelastic
Answer: B) The demand will decrease
Which of the following statements is true regarding the law of demand?
A) Demand curves always slope downward
B) Demand curves always slope upward
C) Demand curves are horizontal
D) Demand curves are vertical
Answer: A) Demand curves always slope downward
If the price elasticity of demand for a good is greater than 1, the demand is considered to be:
A) Perfectly inelastic
B) Inelastic
C) Unitary elastic
D) Elastic
Answer: D) Elastic
Which of the following is NOT a determinant of price elasticity of demand?
A) Availability of substitutes
B) Necessity or luxury status of the good
C) Time horizon for the decision
D) Government regulations on production
Answer: D) Government regulations on production
If the price of a good increases by 10% and the quantity demanded decreases by 15%, what is the price elasticity of demand for the good?
A) 0.67
B) 1.5
C) 1.67
D) 2.5
Answer: A) 0.67
Which of the following statements is true regarding price elasticity of supply?
A) Price elasticity of supply measures the responsiveness of quantity demanded to changes in price
B) Price elasticity of supply is always positive
C) Price elasticity of supply is higher in the short run compared to the long run
D) Price elasticity of supply is higher for necessities compared to luxuries
Answer: C) Price elasticity of supply is higher in the short run compared to the long run
In India, if the government imposes a tariff on imported electronics, what is likely to happen to the demand for domestic electronics?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly elastic
Answer: A) The demand will increase
Which of the following statements is true regarding the relationship between elasticity and slope of the demand curve?
A) Elasticity and slope of the demand curve are always inversely related
B) Elasticity and slope of the demand curve are always directly related
C) Elasticity and slope of the demand curve are independent of each other
D) Elasticity and slope of the demand curve are only related when the curve is perfectly elastic
Answer: A) Elasticity and slope of the demand curve are always inversely related
If the price elasticity of demand for a good is less than 1, the demand is considered to be:
A) Perfectly elastic
B) Inelastic
C) Unitary elastic
D) Perfectly inelastic
Answer: B) Inelastic
Which of the following factors would lead to a more inelastic demand for a good?
A) Availability of many substitutes
B) Short time period for decision-making
C) Necessity status of the good
D) Small proportion of income spent on the good
Answer: C) Necessity status of the good
In India, if the government imposes a ban on the production of certain agricultural products, what is likely to happen to the demand for imported substitutes?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly elastic
Answer: A) The demand will increase
Which of the following is NOT a determinant of consumer surplus?
A) Price of the good
B) Quantity of the good
C) Consumer income
D) Consumer preferences
Answer: C) Consumer income
If the price elasticity of demand for a good is perfectly inelastic, what does this imply about the slope of the demand curve?
A) The demand curve is vertical
B) The demand curve is horizontal
C) The demand curve is upward sloping
D) The demand curve is downward sloping
Answer: A) The demand curve is vertical
In India, if the government provides subsidies for public transportation, what is likely to happen to the demand for private cars?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly inelastic
Answer: B) The demand will decrease
Which of the following statements is true regarding the concept of consumer surplus?
A) Consumer surplus equals the difference between total revenue and total cost
B) Consumer surplus represents the additional satisfaction gained by consuming one more unit of a good
C) Consumer surplus is maximized when the price of a good is equal to its marginal cost
D) Consumer surplus is the difference between the highest price consumers are willing to pay and the price they actually pay
Answer: D) Consumer surplus is the difference between the highest price consumers are willing to pay and the price they actually pay
When the price of a good decreases, what happens to the consumer surplus of consumers who are highly price-sensitive?
A) Increases
B) Decreases
C) Remains unchanged
D) Becomes perfectly elastic
Answer: A) Increases
Which of the following statements is true regarding the concept of price elasticity of demand?
A) Price elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in price
B) Price elasticity of demand is always positive for normal goods
C) Price elasticity of demand is negative for inferior goods
D) Price elasticity of demand is used to measure the responsiveness of quantity demanded to changes in income
Answer: A) Price elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in price
In India, if the government imposes a ban on the export of certain agricultural products, what is likely to happen to the domestic demand for those products?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly inelastic
Answer: A) The demand will increase
Which of the following is NOT a factor that influences the price elasticity of demand for a good?
A) Availability of substitutes
B) Necessity or luxury status of the good
C) Time period under consideration
D) Government regulations on production
Answer: D) Government regulations on production
If the price elasticity of demand for a good is 1, the demand is considered to be:
A) Perfectly elastic
B) Inelastic
C) Unitary elastic
D) Perfectly inelastic
Answer: C) Unitary elastic
In India, if the government imposes a subsidy on organic food products, what is likely to happen to the demand for organic food?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly inelastic
Answer: A) The demand will increase
Which of the following statements is true regarding the concept of income elasticity of demand?
A) Income elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in income
B) Income elasticity of demand is always positive for normal goods
C) Income elasticity of demand is negative for inferior goods
D) Income elasticity of demand is used to measure the responsiveness of quantity demanded to changes in price
Answer: B) Income elasticity of demand is always positive for normal goods
When the price of a good increases, what happens to the consumer surplus of consumers who are less price-sensitive?
A) Increases
B) Decreases
C) Remains unchanged
D) Becomes perfectly elastic
Answer: B) Decreases
Which of the following statements is true regarding the concept of price elasticity of supply?
A) Price elasticity of supply measures the percentage change in quantity supplied divided by the percentage change in price
B) Price elasticity of supply is always positive
C) Price elasticity of supply is higher in the long run compared to the short run
D) Price elasticity of supply is higher for luxuries compared to necessities
Answer: A) Price elasticity of supply measures the percentage change in quantity supplied divided by the percentage change in price
In India, if the government imposes a tax on imported luxury goods, what is likely to happen to the demand for domestic luxury goods?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly elastic
Answer: A) The demand will increase
Which of the following statements is true regarding the concept of consumer surplus?
A) Consumer surplus represents the additional satisfaction gained by consuming one more unit of a good
B) Consumer surplus is maximized when the price of a good is equal to its marginal cost
C) Consumer surplus is the difference between total revenue and total cost
D) Consumer surplus is the difference between the price consumers are willing to pay and the price they actually pay
Answer: D) Consumer surplus is the difference between the price consumers are willing to pay and the price they actually pay
When the price of a good decreases, what happens to the consumer surplus of consumers who are less price-sensitive?
A) Increases
B) Decreases
C) Remains unchanged
D) Becomes perfectly elastic
Answer: A) Increases
Which of the following statements is true regarding the concept of price elasticity of demand?
A) Price elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in price
B) Price elasticity of demand is always positive for normal goods
C) Price elasticity of demand is negative for inferior goods
D) Price elasticity of demand is used to measure the responsiveness of quantity demanded to changes in income
Answer: A) Price elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in price
In India, if the government imposes a ban on the production of certain agricultural products, what is likely to happen to the demand for imported substitutes?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly elastic
Answer: A) The demand will increase
Which of the following is NOT a determinant of consumer surplus?
A) Price of the good
B) Quantity of the good
C) Consumer income
D) Consumer preferences
Answer: C) Consumer income
If the price of a good increases by 10% and the quantity demanded decreases by 15%, what is the price elasticity of demand for the good?
A) 0.67
B) 1.5
C) 1.67
D) 2.5
Answer: A) 0.67
Which of the following statements is true regarding the concept of price elasticity of supply?
A) Price elasticity of supply measures the percentage change in quantity supplied divided by the percentage change in price
B) Price elasticity of supply is always positive
C) Price elasticity of supply is higher in the long run compared to the short run
D) Price elasticity of supply is higher for luxuries compared to necessities
Answer: A) Price elasticity of supply measures the percentage change in quantity supplied divided by the percentage change in price
In India, if the government imposes a tax on imported luxury goods, what is likely to happen to the demand for domestic luxury goods?
A) The demand will increase
B) The demand will decrease
C) The demand will remain unchanged
D) The demand will become perfectly elastic
Answer: A) The demand will increase
Which of the following statements is true regarding the concept of consumer surplus?
A) Consumer surplus represents the additional satisfaction gained by consuming one more unit of a good
B) Consumer surplus is maximized when the price of a good is equal to its marginal cost
C) Consumer surplus is the difference between total revenue and total cost
D) Consumer surplus is the difference between the price consumers are willing to pay and the price they actually pay
Answer: D) Consumer surplus is the difference between the price consumers are willing to pay and the price they actually pay
When the price of a good decreases, what happens to the consumer surplus of consumers who are less price-sensitive?
A) Increases
B) Decreases
C) Remains unchanged
D) Becomes perfectly elastic
Answer: A) Increases
