Sample Multiple Choice Questions (MCQ's) for CA Foundation - Paper 4 - Business Economics and Business and Commercial Knowledge - PART 1 - BUSINESS  ECONOMICS - Chapter 2: THEORY OF DEMAND AND SUPPLY - For Practice relevant for Dec 22 and May/June 23 Examinations

Q:1 Demand for a commodity refers to:

  1. desire backed by ability to pay for the commodity
  2. need for the commodity and willingness to pay for it
  3. the quantity demanded of that commodity at acertain price.
  4. the quantity of the commodity demanded at a certain price during any particular period of time.

Answer: 4

Q:2 If regardless of changes in its price, the quantity demanded of a good remains unchanged, then the demand curve for the good will be: 

  1. horizontal.
  2. Vertical.
  3. positively sloped
  4. negatively sloped.

Answer: 2

Q:3 Suppose the price of movies seen at a theatre rises from Rs 120 per person to Rs 200 per person. The theatre manager observes that the rise in price causes attendance at a given movie to fall from 300 persons to 200 persons. What is the price elasticity of demand for movie? (Use Arc Elasticity Method)

  1. 5
  2. 8
  3. 1
  4. 2

Answer: 2

Q:4 Demand for a good will tend to be more inelastic if it exhibits which of the following characteristics?

  1. The good has many substitutes.
  2. The good is a luxury (as opposed to a necessity).
  3. The good is a small part of the consumer's income.
  4. There is a great deal of time for the consumer to adjust to the change in prices

Answer: 3

Q:5 When income increases the money spent on necessaries of life may not increase in the same proportion, This means

  1. income elasticity of demand is zero
  2. income elasticity of demand is one
  3. income elasticity of demand is greater than one
  4. income elasticity of demand is less than one

Answer: 4

Q:6 Potato chips and popcorn are substitutes. A rise in the price of potato chips will ___________ the demand for popcorn and the quantity of popcorn sold will _______

  1. increase, increase
  2. increase; decrease
  3. decrease, decrease
  4. decrease, increase

Answer: 1

Q:7 In Economics, when demand for a commodity increases with a fallin its price it is known as:

  1. Contraction of demand
  2. Expansion of demand
  3. No change in demand
  4. None of the above

Answer: 2

Q:8 Elasticity of supply is measured by dividing the percentage change in quantity supplied of a good by________ 

  1. Percentage change in income
  2. Percentage change in quantity demanded of goods
  3. Percentage change in price
  4. Percentage change in taste and preference

Answer: 3

Q:9 If the price of air-conditioner increases from Rs 30,000 to Rs 30,010 and resultant change in demand is negligible, we use the measure of _______ to measure elasticity. 

  1. Point elasticity of demand since it is a small change
  2. Arc elasticity of demand since it is a small change
  3. Price elasticity based on average prices method
  4. Any of the above

Answer: 1

Q:10 Suppose the income elasticity of education in private school in India is 3.6. What does this indicate: 

  1. Private school education is highly wanted by rich
  2. Private school education is a necessity.
  3. Private school education is a luxury.
  4. We should have more private schools.

Answer: 3


CA Foundation ECONOMICS - PART 1 - BUSINESS ECONOMICS - MCQ for Chapter 3Click Here

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