Multiple Choice Questions on Consumer Behaviour in Economics pdf | Consumer’s Theory and Demand
1. The transformation curve is derived from the
(a) consumption ourve
(b) utility possibility curve
(c) production contract curve
(d) social welfare function
Ans. c
2. Price line is the same as the
(a) production possibility frontier
(b) isocost line
(c) budget line
(d) MR curve under perfect competition
Ans. c
4. As per the law of demand, a demand curve
(a) slopes upward from left to right
(b) slopes downward from left to right
(c) slopes downward from right to left
(d) parallel to the Y-axis
Ans. a
5. If elasticity of demand is zero, the demand curve will be
(a) parallel to X-axis
(b) parallel to Y-axis
(c) upward sloping 45° line
(d) downward sloping from left to right
Ans. b
6. Utility may be defined as
(a) willingness to pay for a commodity
(b) the desire for a commodity
(c) availability of a commodity
(d) want satisfying power of a commodity
Ans. d
7. Opportunity cost may be defined as
(a) the values of available alternatives
(b) difference between explicit cost and implicit cost
(c) the value of next best available alternative
(d) cost of an additional unit of a commodity
Ans. c
8. Marginal utility curve always
(a) s?opes upward
(b) never slopes upward
(c) parallel to X-axis
(d) falls under normal conditions
Ans. d
11. Cross elasticity of demand for a pair of substitute goods will be
(a) positive
(b) unitary
(c) negative
(d) infinite
Ans. a
12. A demand curve shows the relationship between
(a) the maximum price and minimum quantity
(b) the minimum price and minimum quantity
(c) the maximum quantity and the minimum price
(d) the both price and quantity and both are maximum, given consumer’s income
Ans. d
13. Elasticities shown by different points on a demand curve are same in case of
(a) a rectangular hyperbola
(b) a downward sloping straight line
(c) a demand curve parallel to Y-axis
(d) an upward sloping demand curve
Ans. c
14. In case of complementary goods, cross elasticity of demand will be
(a) negative
(c) unitary
(b) zero
(d) infinite
Ans. a
15. Elasticity of demand for a pair of substitute goods is
(a) zero
(b) infinite
(d) negative
(c) positive
Ans. c
16. If price falls from ? 3 to 2 and quantity demanded increases from 15 to 20 units, then elasticity will be
(a) zero
(c) greater than one
(b) equal to one
(d) less than one
Ans. b
17. The degree of price elasticity of demand for goods influenced by
1. availability of substitutes.
2. number of uses of a commodity.
3. if output of goods is changed.
4. proportion of income spent on it.
Which of the statements given above are correct?
(b) 1 and 2
(d) All of these
(a) 1, 2 and 4
(c) 2, 3 and 4
Ans. a
18. Income elasticity of demand will be zero when any given change in income brings
(a) less than proportionate change in demand
(b) no change in deme nd at all
(c) same proportionate change in demand
(d) more than proportionate change in demand
Ans. b
19. Consider the following statements.
1. If the price elasticity of demand for a good is less than one in absolute terms, we say that consumers of this good are not very sensitive to price.
2. A horizontal demand curve for a good could arise because consumers are not sensitive to price changes. Which of the statement(s) given above is/are correct?
(a) Only 1
(c) Both 1 and 2
(b) Only 2
(d) None of these
Ans. c
20. For a pair of substitute goods, if there is a change in price of one commodity X, then other things remaining constant, the change in the quantity demanded of commodity Y in relation to the demand of commodity X will be
(a) in the opposite direction
(b) no change in quantity demanded of Y
(c) in the same direction
(d) cannot be determined
Ans. a
Multiple Choice Questions on Consumer Behaviour in Economics pdf | Consumer’s Theory and Demand
22. When income elasticity of demand is greater than unity, then the commodity is
(a) a luxury commodity
(c) a necessity good
(b) a non-related good
(d) an inferior good
Ans. a
23. Other things remaining constant, a change in the price of a commodity causes the quantity purchased of its complements to move
(a) in the opposite direction
(b) in the same direction
(C) in a negligible manner
(d) can’t be determined
Ans. a
24. For a consumer, equilibrium under indifference curve analysis takes place where
1. slope of indifference curve = slope of budget line.
2. budget line intersects indifference curve.
3. indifference curve is convex to the origin.
4. indifference curve is concave to the origin.
Which of the statements given above are correct?
(a) 1, 2 and 3
(b) 1 and 3
(d) 2 and 3
(c) 2 and 4
Ans. b
26. In case of giffen goods, a fall in price will lead to
(a) increase in demand
(b) decrease in demand
(c) no change in demand
(d) None of these
Ans. b
27. A shift in demand curve is due to change in
1. price of the commodity itself.
2. price of related goods.
3. income of the consumer.
4. taste and preferences of the consumer.
Which of the statements given above are correct?
(a) 1,3 and 4
(c) 1,3 and 4
(b) 1 and 2
(d) 2. 3 and 4
Ans. d
28. An exception to the law of demand is
1. demand for giffen goods.
2. demand for second hand goods.
3. demand for daily newspapers.
4. demand based on fears of a future rise in prices.
Which of the statements given above is/are correct?
(a) Only 1
(c) 1 and 4
(b) 1 and 2
(d) All of these
Ans. c
29. A production possibility curve can be
1. concave to the origin
2. convex to the origin
3. straight line
4. upward sloping
Which of the statements given above are correct?
(b) 1,3 and 4
(d) All of these
(a) 1,2 and 3
(c) 1 and 3
Ans. a
30. Law of diminishing marginal utility states that
(a) utility initially increases and then after that diminishes at every point
(b) total utility diminishes with the consumption of each additional unit
(c) utility always falls irrespective of consumption of a good
(d) the marginal utility derived from consumption of an additional unit of a commodity always diminishes
Ans. d
Theory of demand mcq with answers | Theory of consumer behaviour mcq with answers
31. Derived demand means
(a) when price is related with demand
(b) when price is not associated with demand
(c) when demand for one good leads to demand for another good
(d) when are demanded jointly goods
Ans. c
33. If more of a commodity is demanded at the same price or the same quantity is demanded at a higher price, this is known as
(a) extention of demand
(b) contraction of demand
(c) increase in demand
(d) decrease in demand
Ans. c
34. A consumer will be maximising his utility if he allocates his money income in such a way that
(a) the MU of last unit of each product consumed is equal
(b) the MU from the last rupee spent on each purchased product is the same
(c) elasticity of demand is the same for all purchased products
(d) total utility gained from each product consumed is the same
Ans. b
35. Which of the following is also known as the Gossen first law?
(a) Law of equil-marginal utility
(b) Law of diminishing marginal utility
(c) The law of indifference
(d) Law of substitution
Ans. b
36. When with a change in price, the total outlay on commodity remains constant, it is a case of
(a) perfectiy elasticity
(C) pertectly inelastic
(b) unit elastic
(d) zero elasticity
Ans. b
37. The area which lies below a demand curve represents
(a) marginal utility
(b) total utility
(c) total income
(d) marginal cost of production
Ans. b
38. As the price of a good increases, the change in the quantity demanded can be shown by
(a) moving down along the same dermand curve
(b) moving up along the same demand curve
(c) shifting the dernand curve leftvard
(d) shifting the demand curve rightward
Ans. b
39. The law of demand states that
(a) demand increases with increase in income
(b) when price falls, quantity demanded increases
(c) when price increases, quantity demanded increases
(d) when income and prices rise, the demand also rises
Ans. b
40. Other things being equal, what causes a decrease in demand?
(e) Fall in the price of the commodity
(b) Rise in the price of the commadity
(c) Rise in the price of the substitute good
(d) None of the above
Ans. d
Theory of consumer behaviour questions and answers pdf | Theory of demand mcq
41. The vertical demand curve for a commodity shows that its demand is
(a) perfectly elastic
(b) highly elastic
(d) None of these
(c) fairly elastic
Ans. d
42. Consider the following statements.
1. Welfare definition was given by Professor Alfred Marshall, who explained economics as a science of welfare.
2. Alfred Marshall introduced the concept of elasticity of demand into economic theory.
3. Demand analysis is one area of economics that has been used most extensively in business.
Which of the statements given above are correct?
(a) 1 and 2
(c) 1 and 3
(b) 2 and 3
(d) 1, 2 and 3
Ans. d
43. ‘Ceteris paribus’ clause in the law of demand means
(a) the income of the consumer does not change
(b) the price of the complementary goods does not change
(c) the price of its substitutes does not change
(d) All of the above
Ans. d
44. The law of demand refers to
(a) price-income relationship
(b) price-demand relationahp
(C) price-supply rolationship
(d) None of the above
Ans. b
45. Ceteris paribus, a change in the price of a commodity causes the quantity purchased of its complements to move
(a) in the opposite direction
(c) in an insignificant manner
(d) None of these
(b) in the same direction
Ans. a
46. When there is decrease in demand, the demand curve
(a) moves upwards away from the axis
(b) moves upwards towards the axis
(c) moves downwards away from the axis
(d) moves downwards towards the axis
Ans. d
48. Consider the following statements.
(a) When the slope of demand curve is zero, elasticity is unity and also when the slope is infinite, elasticity is unity.
2. When the slope of the demand curve is zero, demand is infinitely elastic and when the slope is infinite, elasticity is zero,
Which of the statements given above is/are correct?
(a) Only
(c) Both 1 and 2
(b) Only 2
(d) None of these
Ans. b
49. Consider the following statements.
1. If demand curve for a good is horizontal and the price is positive, then a leftward shift of the supply curve results in a price of zero.
2. A vertical demand curve results in no change in quantity when the supply curve shifts.
3. The percentage change in the quantity demanded in response to a percentage change in the price is known as the price elasticity of demand.
Which of the statements given above are correct?
(a) 1 and 2
(b) 2 and 3
(c) 1 and 3
(d) 1.2 and 3
Ans. b
50. A typical demand curve cannot be
(a) rising upwards to the right
(b) convex to the origiri
(c) a straight line to horizontal axis
(d) None of the above
Ans. a
Theory of demand and supply mcq
51. The exceptions to law of demand are
(a) veblen goods
(c) Both a’ and b’
(b) giffen goods
(d) None of these
Ans. c
52. In the case of an inferior commodity, the income elasticity of demand is
(a) positive
(c) infinity
(b) negative
(d) None of these
Ans. b
53. If demand curve is vertical, thene, is equal to
(a) 0
(b) -1
(c) 1
(d) -1
Ans. a
54. A fall in the price of a commodity leads to
(a) a fall in demand
(b) a shift in demand
(d) None of these
(c) a rise in demand
Ans. c
55. If demand curve is horizontal, thene, is equal to
(a) 0
(b) infinite
(c) 1
(d) – 1
Ans. b
56. Two goods that have to be consumed simultaneously are
(a) substitutes
(c) identical
(b) complementary
(d) None of these
Ans. b
57. Cross elasticity of complementary goods is
(b) high
(a) zero
(c) negative
(d) infinite
Ans. c
58. Which one of the following statement is incorrect?
(a) Income effect is positive iri case of normal goods
(b) Income effect is zero in case of superior goods
(c) All giffen goods are inferior goods but all inferior goods are not giffen goods
(d) Income effect is negative in case of interior goods
Ans. b
59. Marshallian theory of consumer’s behaviour is based on
(a) hypothesis of additive utilities
(b) hypothesis of independent utilities
(c) Both ‘a’ and ‘b
(d) weak ordering
Ans. c
60. If cross elasticity of one commodity for another turns out to be zero, it means they are
(b) good complements
(d) None af the above
(a) close substitutes
(c) completely unrelated
Ans. a
61. A high positive value of cross elasticity indicates that the two commodities are
(a) very good substitutes
(c) good complements
(b) poor substitutes
(d) poor complements
Ans. b
62. Utility is always related to
(a) usefulness
(C) profit
(b) want satistying capacity
(d) maximum returns
Ans. a
63. An indifference curve indicates, other things remaining the same
(a) combinations of goods X and Y which yield equal level of satisfaction
(b) combinations of goods X and Y which do not yield equal satisfaction
(c) a consumer’s preference for any two goods
(d) the amount of commodities X and Y that a consumer will buy at given prices
Ans. a
64. Which of the following concepts are most closely associated with Alfred Marshall?
(a) Marginal utility theory
(b) Price mechanism under monopoly
(c) Modern theory of wage
(d) Interest theory
Ans. a
65. Marginal utility is equal to average utility when
(b) AU is maximum
(d) None of these
(a) MU is maximum
(c) AU is minimum
Ans. c
66. Marginal Utility (MU) curve is always
(a) rising
(c) parallel to X-axis
(b) falling
(d) parallel to Y-axis
Ans. b
67. The cardinal utility approach was developed by
(a) Marshall
(c) Fisher
(b) Hicks
(d) Samuelson
Ans. a
68. Law of diminishing marginal utility states that
(a) total utility diminishes with the consumption of every additional unit
(b) utility always diminishes whether something is consumed or not
(c) utility first increases and after that diminishes at every point
(d) the additional benefit which a person derives from a given increase of his stock of a thing diminishes with every increase in stock that he already has
Ans. d
69. The economically relevant range of the total utility curve is the portion over which
(a) the total utility is rising at a declining rate
(b) the total utility is rising at an increasing rate
(c) the total utility is maximum and constant
(d) the total utility is declining
Ans. a
Multiple Choice Questions on Consumer Behaviour in Economics pdf | Consumer’s Theory and Demand
71. Total utility is maximum when marginal utility is
(a) positive
(b) negative
(c) zero
(d) maximum
Ans. c
72. If more is demanded at the same price or the same quantity is demanded at a higher price, this is known as
(a) Extension of demand
(b) Contraction of demand
(d) Decrease in demand
(c) Increase in demand
Ans. c
73. Indifference curves
(a) do not intersect with each other
(b) are concave to origin
(c) are horizontal to X and Y-axés
(d) Both ‘a’ and ‘b’
Ans. a
74. Indifference curve is convex to its origin, since
(a) MRS, decreases
(b) MRS increases
(c) MAS remains the same
(d) MU of commodity Y is decreasing as one increases the consumption of commodity
Ans. a
75. When marginal utility is diminishing but remains positive
(a) total utility is maximum
(b) total utility is decreasing
(c) total utity tends to increase at a diminishing rate
(d) total utility tends to increase at an increasing rafe
Ans. c
76. The statement X =Y =100 utils implies
(a) an ordinal measure of utility only
(b) a cardinal measure of utility only
(c) an ordinal and a cardinal measurement of utility
(d) All of the above
Ans. b
77. At equilibrium, the slope of an indifference curve is
(a) equal to the slope of budget line
(b) greater than the slope of budget line
(c) less than the slope of budget line
(d) Any one of the above
Ans. a
78. After reaching the saturation point, consumption of additional units of the commodity cause
(a) total utility to fall and marginal utility to increase
(b) total utility and marginal utility both to increase
(C) total utility to fali and marginal utility to become negative
(d) total utility to become negative and marginal utility to fall
Ans. c
79. The slope of an indifference curve shows
(a) the price ratio
(b) the diminishing MRS
(c) an ordinal and a cardinal measurement of utility
(d) All of the above
Ans. b
80. Utility is .. concept.
(a) qualitative
(c) Both a’ anid ‘b’
(b) quantitative
(d) None of these
Ans. c
81. Which of the following is the second fundamental law of Gossen?
(a) Law of diminishing marginal utility
(b) Law of equi-marginal utility
(c) Law of demand
(d) None of the above
Ans. b
82. Substitution effect for giffen goods will be
(b) negative
(d) None of these
(a) positive
(c) zero
Ans. b
83. Which of the following are the properties of indifference curves?
1. Convex to the origin.
2. Downward sloping from right to left.
3. Higher IC, higher satisfaction.
4. ICs cannot intersect.
Select the correct answer using the codes given below.
(a) 1 and 2
(c) 1, 3 and 4
(b) 1, 2 and 3
(d) All of these
Ans. c
84. Goods X and Y are perfect substitutes. A consumer’s indifference curve for these commodities is represented by a
(a) upward sloping straight line
(b) upward sloping curve which is convex to origin
(c) downward sloping straight line
(d) downward sloping curve which is convex to origin
Ans. c
86. The indifference curve which is ‘L’ shape represents
(a) perfect complementarity
(b) perfect substitutability
(c) non-substitutability
(d) non-complementarity
Ans. a
87. A consumer’s demand curve can be obtained from
(a) income-consumption curve
(b) engel’s curve
(c) price-consumption curve
(d) None of the above
Ans. c
88. The falling part of a TU curve shows
(a) increasing marginal utility
(b) decreasing marginal utility
(c) zero marginal utility
(d) negative marginal utility
Ans. d
89. A consumer reaches equilibrium at the point where
(a) MU = P
(c) MU > P
(b) MU < P
(d) TU = P
Ans. a
90. Utils’ is a term used
(a) by Marshal in dermand theory
(b) by Walras to measure cardinal utility
(c) to mean marginal utility
(d) None of the above
Ans. b
