Demand and Its Determinants for CUET Economics

AnswerB · the quantity demanded of a good falls when its price rises

1. Price and quantity demanded move in opposite directions, other factors held constant.

AnswerD · a table showing the quantities of a good demanded at different prices

1. It pairs each price with the quantity buyers would demand at it; drawn as a graph, it is the demand curve.

AnswerA · slopes downward from left to right

1. Lower prices go with larger quantities demanded, so the curve falls to the right.

AnswerA · Quantity demanded rises from 20 to 40: a movement down the curve from A to B

1. A change in the good's own price moves the buyer along the same curve.

2. At ₹8 the quantity is 20 (A); at ₹4 it is 40 (B). This is an extension of demand.

AnswerB · 10

1. Qd = 60 − 5 × 10 = 60 − 50 = 10.

AnswerC · ₹12

1. Set Qd = 0: 60 − 5P = 0, so P = 12.

2. This is where the demand curve meets the price axis.

AnswerC · When a good becomes cheaper, buyers switch to it from its substitutes

1. A lower price makes the good cheaper relative to its substitutes, so buyers substitute towards it: the substitution effect.

2. A lower price also raises real income (income effect) and, with diminishing MU, a lower price justifies more units.

AnswerB · the income effect

1. A lower price raises the consumer's real income, his purchasing power, which lets him buy more.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true.

2. The inverse relation (the law of demand) is exactly what a downward slope draws, so R explains A.

AnswerA · Only I

1. I is true: 'other things being equal' is part of the law.

2. II is false: the law relates quantity to the good's own price, not to income.

AnswerD · Qd = 35 − 5P

1. Each ₹1 fall in price raises quantity by 5, so the coefficient of P is −5.

2. At P = 5, Q = 10: 10 = a − 25, so a = 35. Check at P = 1: 35 − 5 = 30.

AnswerD · Goods bought as status symbols, whose demand rises with price

1. Some buyers want a good because it is expensive, so a higher price can raise the quantity they demand.

2. Salt still obeys the law, though its demand is inelastic.

AnswerA · Only I

1. I is true: willingness and ability together make demand.

2. II is false: a desire without the means to pay is not demand in economics.

AnswerD · ₹60

1. At ₹3, quantity demanded is 20.

2. Total spending = price × quantity = ₹3 × 20 = ₹60.

AnswerC · A is true, but R is false.

1. A is the income effect, which is true for a normal good.

2. R is false: money income is unchanged; it is real income, what the money can buy, that rises.

AnswerC · The cost of producing the good

1. Demand depends on things on the buyer's side: own price, income, prices of related goods, tastes and expectations.

2. The cost of production is a determinant of supply.

AnswerA · the quantity demanded, a movement along the demand curve

1. The good's own price is on the axis of the demand curve; changing it moves the buyer along the curve.

AnswerD · shifts to the right

1. A favourable change in tastes raises the quantity demanded at each price.

2. More at every price means the whole curve moves right: an increase in demand.

AnswerC · rises

1. Buyers bring purchases forward to beat the expected price rise.

2. So demand today rises: the curve shifts right.

AnswerA · increases: the market demand curve shifts right

1. Market demand adds up all buyers; more buyers mean more demanded at each price.

AnswerB · A rise in consumers' income

1. At ₹6, demand rises from 30 to 50: more is demanded at the same price, so demand has increased.

2. For a normal good, a rise in income does this. A cheaper substitute or a dearer complement would shift it left.

AnswerD · It rises by 20 units

1. On D at ₹6: 60 − 5 × 6 = 30. On D₁ at ₹6: 80 − 5 × 6 = 50.

2. The rise is 50 − 30 = 20 units at the same price.

AnswerA · a decrease in demand

1. At the same price of ₹6, buyers now want 10 instead of 30: less at each price.

2. A leftward shift of the whole curve is a decrease in demand.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true.

2. Because they are substitutes (R), cheaper tea draws buyers away from coffee, lowering coffee's demand at each price (A).

AnswerB · A very hot summer

1. Weather changes tastes for the season: more ice cream is wanted at every price.

2. Own-price changes move along the curve; lower income shifts a normal good's curve left.

AnswerB · Only II

1. I is false: a dearer complement makes using the pair costlier, so demand falls (left).

2. II is true: a dearer substitute sends buyers to this good (right).

AnswerC · shifts to the left

1. An unfavourable change in tastes lowers demand at each price: a leftward shift.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true, and R explains A.

AnswerB · Only II

1. I is false: own price moves the buyer along the curve.

2. II is true: related goods' prices are among the 'other things' whose change shifts the curve.

AnswerC · It decreases: the demand curve shifts left

1. The transfer raises households' income.

2. Demand for an inferior good falls as income rises, so its curve shifts left.

AnswerB · rises from 50 to 60

1. At Y = 200: 50 − 20 + 20 = 50. At Y = 300: 50 − 20 + 30 = 60.

2. Demand rises with income, so this is a normal good and its curve shifts right.

AnswerD · rises when the consumer's income rises

1. For a normal good, income and demand move in the same direction.

AnswerB · falls when the consumer's income rises

1. As income rises, buyers switch from an inferior good to a better one, so its demand falls.

2. Coarse grains for a household that can now afford better grains are a common example.

AnswerC · complements

1. Complements are consumed together, so a rise in the price of one lowers the demand for the other.

AnswerC · an inferior good

1. Its demand falls as income rises, which defines an inferior good.

2. Fine rice, whose demand rises with income, is a normal good for the family.

AnswerB · falls: the demand curve for cars shifts left

1. Cars and petrol are complements: running a car now costs more.

2. So fewer cars are demanded at each car price: a leftward shift.

AnswerD · substitutes

1. Dearer Y sends buyers to X, which can take its place: they are substitutes.

AnswerA · Pen and ink

1. A pen needs ink: they are used together.

2. The other pairs can each be used in place of the other: substitutes.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true, and R is the definition that makes A follow.

AnswerC · Both I and II

1. Both are true: the label depends on how a particular buyer's demand responds to his income.

2. A poor household may buy more coarse grain as income first rises, then less once it can afford better food.

AnswerA · A-II, B-IV, C-I, D-III

1. Higher income raises demand for a normal good; cheaper coffee, a substitute, lowers it.

2. Dearer sugar, a complement, lowers it; tea's own price fall is a movement along the curve.

AnswerC · increases

1. Printers and ink are complements: cheaper printers mean more printers in use.

2. So more ink is demanded at every ink price: an increase in demand.

AnswerA · decreases

1. Train and bus travel are substitutes: cheaper trains draw travellers away from buses.

AnswerD · an inferior good whose quantity demanded rises when its price rises

1. For a very poor household spending much of its income on a staple, a price rise can cut real income so much that it buys more of the staple and less of costlier food.

2. This is an exception to the law of demand; such goods are always inferior goods.

AnswerD · A is false, but R is true.

1. A is false: most inferior goods still obey the law of demand; only an extreme few are Giffen goods.

2. R is true: a Giffen good must be inferior.

AnswerA · Only I

1. I is true: dearer tea, more coffee demanded.

2. II is false: dearer petrol, fewer cars demanded; they move in opposite directions.

AnswerC · more is bought because the good's own price has fallen

1. Extension is a movement down the demand curve caused by a fall in own price.

2. More at the same price is an increase in demand, a shift.

AnswerB · a rise in the good's own price

1. Contraction is a movement up the same demand curve, which only a rise in own price causes.

2. The other changes shift the curve (a decrease in demand).

AnswerB · A fall in the price of a substitute

1. A decrease in demand is a leftward shift caused by a factor other than own price.

2. A cheaper substitute is such a factor; own-price changes cause contractions or extensions.

AnswerA · Only I

1. I is true; II is false: a shift comes from income, related goods' prices, tastes, expectations or the number of buyers.

AnswerC · A is true, but R is false.

1. A is true.

2. R is false: more at every price is a rightward shift of the curve; a movement down it is an extension.

AnswerA · A-III, B-I, C-IV, D-II

1. Extension and contraction are movements along one curve, down and up.

2. Increase and decrease are shifts of the whole curve, right and left.

AnswerA · the increase in demand from income offset the contraction from the price rise

1. The price rise moves buyers up the curve (less); the income rise shifts the curve right (more).

2. If the two pulls are equal, the quantity bought can stay where it was.

AnswerD · Rise in own price — contraction of demand

1. A rise in own price moves buyers up the curve: contraction.

2. Higher income raises a normal good's demand (increase); a cheaper substitute lowers it (decrease); own-price fall is an extension.

AnswerB · rises from 20 to 30

1. Before: 60 − 40 = 20. After: 60 − 40 + 10 = 30.

2. Ten more units at the same price: an increase in demand.

AnswerD · A is false, but R is true.

1. A is false: since tastes are held constant along the curve, a change in them shifts the whole curve.

2. R is true.

AnswerD · the sum of the quantities demanded by all buyers at each price

1. At each price, add up what every buyer wants: that is the market quantity demanded.

2. On a graph this is the horizontal sum of the individual demand curves.

AnswerC · 11 kg

1. At ₹8: Anu 4 + Ravi 5 + Sara 2 = 11 kg.

AnswerC · 11 kg

1. At ₹10: 2 + 3 + 1 = 6 kg. At ₹6: 6 + 7 + 4 = 17 kg.

2. The rise is 17 − 6 = 11 kg.

AnswerC · Q = 50 − 5P

1. Add the quantities at each price: (20 − 2P) + (30 − 3P) = 50 − 5P.

2. Both buyers demand something only up to P = 10, so the sum holds for prices from 0 to 10.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true.

2. Adding quantities at a given price means adding along the horizontal (quantity) axis, so R explains A.

AnswerC · 6 kg

1. At ₹10: 2 + 3 + 1 = 6 kg.

AnswerC · 26 kg

1. Before the new buyer, at ₹4: 8 + 9 + 6 = 23 kg.

2. Adding 3 kg: 26 kg. More buyers shift the market demand curve to the right.

AnswerC · 30

1. q₁ = 20 − 8 = 12; q₂ = 30 − 12 = 18.

2. Market demand = 12 + 18 = 30. Check: 50 − 5 × 4 = 30.

AnswerC · Both I and II

1. I is true: new buyers entering raise the total.

2. II is true: moving income from one group to another changes which goods are demanded and how much.

AnswerC · 13 kg

1. Without Sara: Anu 6 + Ravi 7 = 13 kg at ₹6.

2. Fewer buyers shift the market demand curve to the left.