Tag: shifts in demand and supply

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Questions Related to shifts in demand and supply

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

When demand curve shifts to the right, What happens to the new equilibrium?

  1. Higher than original

  2. Lower than original

  3. Same as original

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When the demand curve shifts to the right, the new equilibrium point is reached at a higher price and quantity compared to the original equilibrium.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

When the price of petrol goes up, demand for cars will _____ . 

  1. rise

  2. fall

  3. not changes

  4. remain unchanged
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Petrol and cars are complementary goods. When the price of a complement (petrol) rises, the demand for the associated good (cars) falls.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Indirect demand is also known as ______ demand.

  1. derived

  2. direct

  3. composite

  4. joint
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Indirect demand, or derived demand, occurs when the demand for a good or service is a consequence of the demand for something else (e.g., demand for labor is derived from the demand for the product the labor produces).

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

In the case of unitary elastic demand, the total outlay of the consumer before the price change and after the price change will ______ . 

  1. become more

  2. become less

  3. remain the same

  4. fluctuate
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In the case of unitary elastic demand, the total outlay of the consumer before the price change and after the price change will remain the same. This is a hypothetical case as there is no real life examples for the same. 

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

The life saving medicines have inelastic demand. 

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

True. Life saving medicines have inelastic demand. By inelastic we mean when the price changes that consumer buying habit remains the same. The consumer will not reduce the consumption of a life saving drug is the price increase and vice versa. 

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Government expenditure increases aggregate demand.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

True.  Government expenditure increases Aggregate demand. Its one of the components to determine demand. Aggregate demand takes into account all the expenditure incurred in the country during the year. Government spending can be in the form of welfare, pension etc which increases the purchasing power of the people thereby increasing demand. 

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

If the demand is less than unitary elastic , the total outlay of the consumers will change in the opposite direction of change in price.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

False. If the demand is less than unitary elastic, the total outlay of the consumers will change in the same direction of change in price. In this case when the total expenditure rises with a rise in price and decreases with a fall in price elasticity will be less than 1.  

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

A firm total cost is not dependent upon which of the following?

  1. Maximum retail price of the final produt

  2. Taxes

  3. Input output ratio

  4. Cost of inputs
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Total cost is determined by the cost of inputs, technology, and taxes. The Maximum Retail Price (MRP) is a selling price determined by the firm or regulation, not a factor that determines the cost of production.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

As per Total Revenue less Total Cost (TR - TC) approach of looking at the producer's equilibrium, which of the following condition is necessary for producer's equilibrium?

  1. The difference between TR and TC is maximum

  2. Profits falls if one more unit of output is produced

  3. Both (A) and (B)

  4. Either (A) or (B)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In the TR-TC approach, a producer is in equilibrium when profit (TR-TC) is maximized. This occurs when the gap between TR and TC is at its peak, and producing one more unit would result in a decrease in profit.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

As per Marginal Revenue and Marginal Cost (MR and MC) approach of looking at the producer's equilibrium, which of the following condition is necessary for producer's equilibrium?

  1. MR = MC

  2. MC cuts the MR curve from below

  3. Both (A) and (B)

  4. Either (A) or (B)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The necessary conditions for producer equilibrium in the MR-MC approach are that MR equals MC and that the MC curve must cut the MR curve from below (ensuring profit is maximized rather than minimized).