MCQs on Demand Analysis

Demand Analysis helps to understand the factors affecting the demand for a product or service in a market. Companies use this information to formulate strategies on pricing, marketing communications, sales forecasting, etc.

Below is a list of multiple-choice questions and answers on Demand Analysis to help students understand the topic better.

  1. Which of the following are determinants of demand for a product/service?
    1. Price of the product/service
    2. Income of the buyer
    3. Desire to purchase the product/service
    4. All of the above
  2. Answer: d

  3. The law of demand states that if there is an increase in a product’s selling price ______.
    1. The quantity demanded of that good will decrease
    2. The quantity supplied of that good will decrease
    3. The quantity demanded of that good will increase
    4. The quantity supplied of that good will increase
  4. Answer: a

  5. If the price of a good is above the equilibrium price, then __________.
    1. There is a surplus in the market and the price will fall
    2. There is a shortage in the market and the price will fall
    3. There is a surplus in the market and the price will rise
    4. There is a shortage in the market and the price will rise
  6. Answer: a

  7. If the price of a good is equal to the equilibrium price, then __________.
    1. The quantity demanded of a good is the same as the quantity supplied and the price will remain unchanged
    2. The quantity demanded of a good is more than the quantity supplied and the price will fall
    3. The quantity demanded of a good is less than the quantity supplied and the price will rise
    4. None of the above
  8. Answer: a

  9. An inferior good is a commodity whose _______ with an increase in income.
    1. Demand falls
    2. Demand rises
    3. Supply falls
    4. Supply rises
  10. Answer: a

  11. If consumers think that there are very few substitutes for a particular product, then _____.
    1. Demand for it will be price inelastic
    2. Demand for it will be price elastic
    3. Supply for it will be price inelastic
    4. Supply for it will be price elastic
  12. Answer: a

  13. Two goods are ___________ when the quantity consumed of one increases with the decrease in price of the other.
    1. Substitute
    2. Normal
    3. Complementary
    4. None of the above
  14. Answer: c

  15. Under the cross elasticity of demand between two substitute products, ___________.
    1. If the price of one product increases, the demand for the other product will decrease
    2. If the price of one product decreases, the demand for the other product will decrease
    3. If the price of one product decreases, the demand for the other product will increase
    4. None of the above
  16. Answer: b

  17. Under the cross elasticity of demand between two complementary products ___________.
    1. If the price of one product increases, the demand for the other product will increase
    2. If the price of one product decreases, the demand for the other product will decrease
    3. If the price of one product decreases, the demand for the other product will increase
    4. None of the above
  18. Answer: c

  19. If the price elasticity of demand for a good is 0.5, then the demand for that good is __________.
    1. Inelastic
    2. Elastic
    3. Unitary elastic
    4. None of the above
  20. Answer: b

  21. The actual value for elasticity of demand of a product or service ranges from_______.
    1. Zero to infinity
    2. One to infinity
    3. Zero to one
    4. None of the above
  22. Answer: a

  23. When consumers try to be different and exclusive, by demanding less of a commodity that is popular among people, the phenomenon is known as ________.
    1. Snob effect
    2. Bandwagon effect
    3. Price effect
    4. None of the above
  24. Answer: a

  25. If the price of a commodity declines, the total revenue will increase if the demand is ________.
    1. Inelastic
    2. Unitary Elastic
    3. Elastic
    4. None of the above
  26. Answer: c

  27. Movement along the demand curve shows ________.
    1. Expansion and contraction of demand
    2. Expansion of demand
    3. Contraction of demand
    4. None of the above
  28. Answer: a

  29. Which of the following factors keeps the price elasticity of demand for a product low?
    1. Low price of a product
    2. Close substitutes for a product
    3. Variety of uses for a product
    4. A high proportion of income spent on a product
  30. Answer: a

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