Question

Give true or false giving reasons: a. If quantity demanded of good X rises with the fall in household's income, it is a normal good. b. If demand of CNG rises due to rise in the price of petrol , they are substitutes. c. When the price of the commodity falls its demand increases. d. Demand for a commodity may rise even at constant price. e. Individual demand is related to micro, market demand is related to macro. f. In case of normal goods income effect is negative. g. in case of inferior goods law of demand fails. h. Demand curve of salt shifts when its price falls. i. When price of commodity X rises , its demand decreases.

Answer 1

Dear Student
(a) FALSE , if demand of goods rises with the fall in income it is not normal good it is inferior good
(b) TRUE, when price of one good rises and demand of other good rises than they are substitute goods.
(c) TRUE , when price of goods falls its demand increases when other factors are constant.price and demand of commodity have inverse relationship.
(d) FALSE, it is not always sometimes when price is constant demand of commodity may be fall like when consumer have unfavourable taste for the commodity.
(e) FALSE, because both individual demand and market demand is related to micro concept.
(f) FALSE, when income increases demand of normal goods increases they have positive relationship with each other.
(g) FALSE, in case of inferior goods law of demand fails only when negative income effect is more than substitution effect.
(h) FALSE, when price of salt increases its demand doesn't change because its demand is inelastic it doesn't change with the change in its price.
(i) TRUE, when price of commodity rises its demand falls when other factors are constant.

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