Top 37 questions on Consumer’s Behaviour

THEORY OF CONSUMER’S BEHAVIOUR & DEMAND

Q1. Giffen’ goods are those goods

  • Which give rise to a ‘cobweb’ situation
  • Which have a high cross elasticity of demand
  • Which have a high-income elasticity of demand
  • For which demand increases as price increases

Ans. For which demand increases as price increases

Q2. Demand price is identical with

  • AR
  • MR
  • TR
  • All of these

Ans. AR

Q3. In the case of complements, the cross-demand curve slopes

  • Downwards to the right
  • Upwards to the right
  • Backward to the top
  • Inwards to the bottom

Ans. Upwards to the right

Q4. Which of the following could provide an example of an exceptional demand curve?

  1. Demand for “Giffen goods”
  2. Demand-based on fears of a future rise in price
  3. Demand for second-hand cars
  4. Demand for the daily newspaper

Of these

  • I only
  • I, II
  • II, III
  • I, II, III, IV

Ans. I, II

Q5. An economic theory claims that a rise in petrol prices will cause petrol purchases to fall, ceteris paribus. The phrase “Ceteris paribus” mean that

  • Other relevant factors like consumer’s income must be held consists
  • The petrol prices must be adjusted for inflation
  • The theory is widely accepted, but cannot be accurately tested
  • Consumers need for petrol remains the same regardless of price

Ans. Other relevant factors like consumer’s income must be held consists

Q6. A fall in the price of a commodity leads to

  • Fall in demand
  • A rise in the consumer’s real income
  • A fall in the consumer’s real income
  • None of the above

Ans. A rise in the consumer’s real income

Q7. In an economic model D = f (p) an independent variable is

  • P
  • D and P
  • Neither P and D

Ans. P

Q8. At lower commodity prices more of the commodity will be purchased in the market because

  • Consumers substitute this (now relatively cheaper) commodity for others in consumption
  • At lower prices, consumers can purchase more of the commodity with given money income
  • More consumers buy the commodity at lower prices than at higher prices
  • All of the above

Ans. All of the above

Q9. Which one of the following factors is not a determine of demands.

  • Income
  • Own price
  • Price of unrelated goods
  • Tastes and preferences

Ans. Price of unrelated goods

Q10. Empirical demand curves refer to demand curves estimated from

  • Utility theory
  • The new approach to consumers theory
  • Information provided by individual consumers
  • Actual market price quantity observations

Ans. Actual market price quantity observations

introduction to economics

Q11. Which of the following statements may be applied correctly to the economics’ concept of utility?

  1. It is the amount of satisfaction to be derived from a commodity or service at a particular time
  2. It has important ethical connotations
  3. It is related to the consumer’s subjective estimate of satisfaction
  4. It is not constant and may differ according to time and circumstance

Of these

  • I, II are correct
  • II, III correct
  • I, III, IV correct
  • I, II, III, IV are correct

Ans. I, III, IV correct

Q11. Which of the following matters may account for changes in demand?

  1. Change in consumer preferences
  2. Change in real incomes
  3. Changes in the distribution of income
  4. Changes in levels of taxation

Of these

  • I, II
  • II, III
  • I, II, IV
  • I, II, III, IV

Ans. I, II, IV

Q12. The law of demand states that the quantity demanded of a good change, other things being equal, when

  • The price of a good changes
  • Consumer income changes
  • The price of other goods changes
  • A change occurs in the quantities of other goods purchased

Ans. The price of a good changes

Q13. Which of the following will cause a movement along the demand curve for good X?

  • A change in the price of a close substitute
  • A change in the price of good X
  • A change in consumers tastes and preferences for good X
  • A change in consumers income

Ans. A change in the price of good X

Q14. When we can say with certainty that when the demand for computers increases in the long run, prices

  • Will go up
  • Will come down
  • Change proportionately
  • Can not be predicted without the knowledge of the elasticity of demand

Ans. Can not be predicted without the knowledge of the elasticity of demand

Q15. Assuming X is a normal good, a decrease in consumer income, other things being equal, will

  • Cause a downward movement along the demand curve for X
  • Shift the demand curve for X to the left
  • Cause an upward movement along the demand curve for X
  • Shift the demand curve for X to the right

Ans. Shift the demand curve for X to the left

Q16. “The law of diminishing marginal utility can be applied not only to things like butter and bread, railway journeys, men’s hats, and so on, but also the lectures of economists, the speeches of politicians, and even the number of suspects in detective stories”. This is remarked by

  • Cairncross
  • J. R. Hicks
  • Schumpeter
  • Pigou

Ans. Cairncross

Q17. Marginal utility curve is below X-axis when:

  • MU is constant
  • MU is negative
  • MU is positive
  • MU is zero

Ans. MU is negative

Q18. The amount of added utility that a consumer gains from the consumption of one more unit of a good are called

  • Incremental utility
  • Total utility
  • Diminishing utility
  • Marginal utility

Ans. Marginal utility

Q19. A rational consumer will continue to consume two goods until the

  • Marginal utility per rupee worth of the two goods is the same for the last rupee spent on each good
  • Marginal utility is the same for each good for the last rupee spent on each good
  • Prices of the two goods are equal for the last rupee spent on each good
  • Prices of the two goods are unequal

Ans. Marginal utility per rupee worth of the two goods is the same for the last rupee spent on each good

Q20. Which of the following statements is correct?

  • The utility is a behaviorist concept
  • The utility is not an introspective concept
  • The utility is an introspective concept and so much can not be measured
  • The utility is an introspective concept and as such, it can be measured

Ans. The utility is an introspective concept and so much can not be measured

Q21. The economically relevant range of the total utility curve is the portion over which

  • The total utility is rising at a decreasing rate
  • The total utility is rising at an increasing rate
  • The total utility is maximum and constant
  • The total utility is declining

Ans The total utility is rising at a decreasing rate

Q22. The marginal utility curve of a given consumer is also his

  • Demand curve
  • Indifference curve
  • Total utility curve
  • Supply curve

Ans. Demand curve

Q23. Marshall’s consumer’s surplus is based on

  • Utility is measurable
  • The utility is not measurable
  • The utility is equal to one
  • None

Ans. Utility is measurable

Q24. Since Marshall ignored the income effect of the change in price, he could not provide a satisfactory explanation for the reaction of the consumer to a change in the price of a

  • Normal good
  • Inferior good
  • Giffen good
  • Scarcity good

Ans. Inferior good

Q25. The methodology of indifference curve analysis has provided a framework for the measurement of

  • Profit
  • Introspection
  • Observation
  • Consumer’s surplus

Ans. Consumer’s surplus

Q26. The case of right-angled indifference curves occurs when

  • The two goods are perfect complements
  • The two goods are perfect substitutes
  • The two goods are inferior
  • The two goods are normal

Ans. The two goods are perfect complements

Q27. An indifference curve slopes down towards the right since more of one commodity and less of another result in

  • Same satisfaction
  • Greater satisfaction
  • Maximum satisfaction
  • Decreasing satisfaction

Ans. Same satisfaction

Q28. If expenditure falls with a rise in income, the good is

  • Inferior
  • Superior
  • Normal
  • Luxury

Ans. Inferior

Q29. The demand curve after adjustment to remove effect is called a

  • Compensated demand curve
  • Utility demand curve
  • Income demand curve
  • Price demand curve

Ans. Compensated demand curve

Q30. A consumer is at point Q in the budget line as depicted. Which of the following could have transpired if the consumer later chooses to be at R?

30
  • A change in tastes
  • A small increase in the price of X and a larger percentage decrease in the price of Y.
  • An increase in the price X and a smaller percentage increase in the price of Y
  • A fall in real income

Ans. An increase in the price X and a smaller percentage increase in the price of Y

Q31. The necessary and sufficient conditions for a good to have a positively sloped demand curve is that

  • The good be inferior
  • The substitution effect exceeds the income effect
  • The income effect exceeds the substitution effect
  • The good be inferior and the income effect exceeds the opposite substitution effect

Ans. The good be inferior and the income effect exceeds the opposite substitution effect

Q32. The substitution effect is the response to change in

  • Absolute prices
  • Relative prices
  • Tastes
  • Preferences

Ans. Relative prices

Q33. An indifference curve is also called as

  • Iso- utility curve
  • Iso- revenue curve
  • Iso- profit curve
  • Iso- cost curve

Ans. Iso- utility curve

Q34. In the extreme case of perfect substitutes, the indifference curve is

  • A downward sloping straight line
  • Convex to the origin
  • Concave to the origin
  • L shaped

Ans. A downward sloping straight line

Q35. When the price of an inferior good falls (other things being the same)

  • The substitution and the income effects reinforce each other in causing an increase in the quantity demanded of the inferior good.
  • The substitution and the income effects reinforce each other in causing a decrease in the quantity demanded of the inferior good.
  • The substitution effect tends it income the quantity of the goods demanded, while the income effect tends to reduce it
  • The substitution effect tends to decrease the quantity of the goods demanded, while the income effect tends to increase it.

Ans. The substitution effect tends it income the quantity of the goods demanded, while the income effect tends to reduce it

Q36. Contraction of demand is the result of

  • Decrease in the number of consumers
  • Increase in the price of the good concerned
  • Increase in the prices of other goods
  • Decrease in the income of purchasers.

Ans. Increase in the price of the good concerned.

Q37. The law of Demand, assuming other things to remain constant, establishes the relationship between:

  • Income of the consumer and the quantity of a good demanded by him.
  • Price of a good and the quantity demanded.
  • Price of a good and the demand for its substitute
  • Quantity demanded of a good and the relative prices of its complementary goods.

Ans. Price of a good and the quantity demanded.

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