{"id":10133,"date":"2019-12-06T12:51:44","date_gmt":"2019-12-06T07:21:44","guid":{"rendered":"https:\/\/kseebsolutions.guru\/?p=10133"},"modified":"2021-07-02T15:43:52","modified_gmt":"2021-07-02T10:13:52","slug":"2nd-puc-economics-question-bank-chapter-3","status":"publish","type":"post","link":"https:\/\/kseebsolutions.guru\/2nd-puc-economics-question-bank-chapter-3\/","title":{"rendered":"2nd PUC Economics Question Bank Chapter 3 Demand Analysis"},"content":{"rendered":"

You can Download Chapter 3 Demand Analysis Questions and Answers, Notes, 2nd PUC Economics Question Bank with Answers<\/a> Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations.<\/p>\n

Karnataka 2nd PUC Economics Question Bank Chapter 3 Demand Analysis<\/h2>\n

2nd PUC Economics Demand Analysis One Mark Questions and Answers<\/h3>\n

Question 1.
\nWhat is Demand?
\nAnswer:
\nThe concept \u2018demand\u2019 refers to the quantity of a good or service that a consumer is willing and able to purchase at various prices, during a period of time. It includes desire for a commodity, ability to pay and willingness to pay.<\/p>\n

Question 2.
\nQd = f(p) is the demand function. Identify the independent variable in it.
\nAnswer:
\nIn Qd = f(p), the independent variable is \u2018p\u2019 (price).<\/p>\n

Question 3.
\nState the Law of Demand.
\nAnswer:
\nThe law can be explained in the following manner: \u201cOther things being equal, a fall in price leads to expansion in demand and a rise in price leads to contraction in demand\u201d.<\/p>\n

Question 4.
\nWhat is the relationship between price and demand for complementary goods?
\nAnswer:
\nThere is an inverse relationship between price and demand for complementary goods. (When the price of a product becomes more, the demand for its complementary good falls).<\/p>\n

Question 5.
\nWhat are normal goods?
\nAnswer:
\nNormal goods are those goods for which the demand increases with rise in income of consumers , and decreases with fall in their income.<\/p>\n

Question 6.
\nWhy does the demand curve shift?
\nAnswer:
\nThe shift in demand curve occurs because of changes in all the determinants of demand except price.<\/p>\n

\"KSEEB<\/p>\n

Question 7.
\nName the method of adding two individual demand curves horizontally.
\nAnswer:
\nThe method of adding two individual demand curves is \u2018Horizontal summation\u2019.<\/p>\n

Question 8.
\nGive the meaning of elasticity of demand.
\nAnswer:
\nElasticity of demand is generally defined as the responsiveness or sensitiveness of demand to a given change in the price of commodity.<\/p>\n

Question 9.
\nWrite the simplified formula of income elasticity of demand.
\n\"2nd<\/p>\n

Question 10.
\nIf change in price and change in expenditure are in the same direction, then what will be the price elasticity of demand?
\nAnswer:
\nIf change in price and change in expenditure are in the same direction, the price elasticity of demand is less than one, i.e., less elastic demand. (Ped<\/sub> <1).<\/p>\n

Question 11.
\nWhat is Cross Elasticity of Demand?
\nAnswer:
\nIt may be defined as the proportionate change in the quantity demanded of a particular commodity in response to a change in the price of another related commodity.<\/p>\n

\"KSEEB<\/p>\n

Question 12.
\nWhat is demand function?
\nAnswer;
\nThe Demand Function refers to a functional relationship between quantities demanded and its determinants. It can be expressed as follows:
\nQd = f(P, Pr ,Y, T,………….. ).
\nWhere Qd stands for Quantity demanded, f is function, P is Price of commodity, Pr – price of related\/substitutes, Y is income of consumers, T is tastes and preferences of consumers.<\/p>\n

2nd PUC Economics Demand Analysis Two Marks Questions and Answers<\/h3>\n

Question 1.
\nMention any four determinants of demand.
\nAnswer:<\/p>\n

    \n
  1. Price of the product<\/li>\n
  2. Price of related goods<\/li>\n
  3. Income of consumers and<\/li>\n
  4. Tastes and preferences of consumers.<\/li>\n<\/ol>\n

    Question 2.
    \nIn Qd = 20 – 2p, identify independent variable, dependent variable, constant and co-efficient in it.
    \nAnswer:
    \nQd is dependent variable, P is independent variable, 20 is constant, -2 is coefficient of \u2018p’<\/p>\n

    Question 3.
    \nIf Qd = 30 – 2p is the demand function. Suppose the price of onion in the market is Rs.10 per kg. Calculate the quantity demanded.
    \nAnswer:
    \nQd = 30 – 2p; If price is Rs. 10,
    \nQd = 30 – 2(10)
    \n= 30 – 20
    \n= 10.
    \nThe quantity demanded of onion is 10 kgs.<\/p>\n

    \"KSEEB<\/p>\n

    Question 4.
    \nWhy does the demand curve slope downwards?
    \nAnswer:
    \nThe demand curve slopes downwards because of price effect, substitution effect, income effect and operation of law of diminishing marginal utility.<\/p>\n

    Question 5.
    \nWrite the meaning of cross elasticity of demand and its formula.
    \nAnswer:
    \nIt may be defined as the proportionate change in the quantity demanded of a particular commodity in response to a change in the price of another related commodity<\/p>\n

    \"2nd<\/p>\n

    Question 6.
    \nWhat are complementary goods? Give examples.
    \nAnswer:
    \nComplementary goods are those goods which are consumed together or jointly to satisfy human wants. Example, Shoes and socks, vehicles and petrol, bat and ball etc.<\/p>\n

    Question 7.
    \nConsider the demand for onion. At Rs.10 per kg, demand for onion is 15 kgs. Suppose the price increases to Rs.20 per kg, the demand decreases to 10 kgs. Calculate the price elasticity of demand.
    \nAnswer:
    \nSolution:
    \n\u2206q = 10 – 15 = -5; \u2206p = 20 – 10 = 10; then PED is
    \n\"2nd
    \n= -0.33 (the Price Elasticity is 0.33)<\/p>\n

    Question 8.
    \nThere are only two consumers in a market X and Y. Their demand for a good is given below. Calculate the market demand for the goods and draw the market demand curve.<\/p>\n\n\n\n\n\n\n\n\n\n
    \n

    Price<\/strong><\/p>\n<\/td>\n

    		Demand- X<\/strong><\/td>\nDemand-Y<\/strong><\/td>\n\n

    Market Demand (x + y)<\/strong><\/p>\n<\/td>\n<\/tr>\n

    \n

    2<\/p>\n<\/td>\n

    		16<\/td>\n20<\/td>\n36<\/td>\n<\/tr>\n
    \n

    4<\/p>\n<\/td>\n

    		14<\/td>\n18<\/td>\n32<\/td>\n<\/tr>\n
    \n

    6<\/p>\n<\/td>\n

    		12<\/td>\n15<\/td>\n\n

    27<\/p>\n<\/td>\n<\/tr>\n

    8<\/td>\n10<\/td>\n12<\/td>\n\n

    22<\/p>\n<\/td>\n<\/tr>\n

    10<\/td>\n8<\/td>\n10<\/td>\n\n

    18<\/sup><\/p>\n<\/td>\n<\/tr>\n

    \n

    12<\/p>\n<\/td>\n

    		6<\/td>\n8<\/td>\n\n

    14<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    \"2nd<\/p>\n

    \"KSEEB<\/p>\n

    Question 9.
    \nIf there are two consumers in a market and their individual demand functions are Qd1<\/sub> = 15 – 2p and Qd2<\/sub> = 25 – 3p. Find the Market demand function.
    \nAnswer:
    \nThe market demand function Qd = Qd1<\/sub>+ Qd2<\/sub>
    \nTherefore,
    \nQd = 15 – 2p + 25 – 3p
    \nQd = 40 – 5p<\/p>\n

    When the price is \u20180\u2019, quantity demanded will be
    \nQd = 40 – 5p
    \n= 40 – 5(0)
    \n=40<\/p>\n

    When the quantity demanded is \u20180\u2019, the price will be
    \n0 = 40 – 5p
    \n40 – 5p = 0
    \n40 = 5p
    \nP = 40\/5
    \nP = 8
    \nSo the Market demand is \u201840\u2019 and Market price is Rs.8.<\/p>\n

    Question 10.
    \nHow do the movements along the demand curve occur?
    \nAnswer:
    \nThe movements along the demand curve occur on the basis of the inverse relationship between price and quantities demanded. When the price is less, demand will be more and when the price is more, demand will be less. So, any changes in price lead to movement on the demand line.<\/p>\n

    2nd PUC Economics Demand Analysis Five Marks Questions and Answers<\/h3>\n

    Question 1.
    \nWhy does the demand curve slope downwards? Explain.
    \nAnswer:
    \nIn order to represent the inverse relationship between price and demand, the demand curve must slope downwards. Apart from this basic reason, there are many other factors which make the demand curve to slope downwards. They are as follows:<\/p>\n

    (a) Operation of the law of Diminishing Marginal Utility:
    \nThe law of DMU states that as the consumer acquires larger quantities of any commodity, the additional units of\u00a0 \u00a0 \u00a0 \u00a0 the same product will give him lower utility, and as such he gets a less value for the additional under The law of\u00a0 \u00a0 \u00a0 \u00a0 demand states that in order to induce the consumer to buy more less price must be offered.<\/p>\n

    (b) Operation of the law of Equi – Marginal Utility:
    \nThis law states that utility of the product must be equal to its price in general. As price falls, the equality between the two will be disturbed and in order to re-establish this equality the consumer buys more. Now utility comes to the level of reduced price. Hence, as price falls, a consumer buys more.<\/p>\n

    (c) Income effect:
    \nA change in demand as a result of change in income is called as Income effect. As price falls, the real income of the consumer increases. With this increased real income (gets more purchasing power with more money in his hands), he buys more.<\/p>\n

    (d) Substitution effect:
    \nWhen the price of one product falls, it becomes cheaper when compared to other products \u2019 for which price remains constant. Hence, a consumer will substitute low priced product to high priced product. The result is that demand for a product rises as price falls.<\/p>\n

    (e) Price Effect:
    \nWhen the change in quantities demanded is caused by the change in price, it is called as Price effect. When the price of a product falls, it becomes cheaper and consumer buys more of that and vice versa.
    \nHence, the demand curve always slopes downwards from left to right.<\/p>\n

    Question 2.
    \nHow does the demand curve shift? Explain with a diagram.
    \nAnswer:
    \n(a) Shift in demand curve – Increase and Decrease in Demand:
    \nThe increase and decrease in demand are caused by all the determinants of demand except price. When there is change in consumer\u2019s income, tastes and preferences, price of related goods, there may be increase or decrease in demand.<\/p>\n

    (b) Increase in Demand:
    \nWhen the income of consumer increases, the demand for the product increases and there will be shift in demand line towards right. For normal goods, the demand, curve shifts to the right. In the diagram given below, D:\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 represents shift in demand line towards right indicating increase in demand.<\/p>\n

    (c) Decrease in Demand:
    \nWhen the price of related goods rise, the demand for the product falls and the demand curve shifts towards left.\u00a0 \u00a0 \u00a0 For example, if there is rise in price of petrol, the demand for vehicle decreases, representing backward shift of demand line. In the diagram below, D2<\/sub> represents shift in demand towards left indicating decrease in demand.<\/p>\n

    \"2nd<\/p>\n

    \"KSEEB<\/p>\n

    Question 3.
    \nWhat is income elasticity of demand? Calculate the income elasticity of demand when income of consumer increases from Rs.10,000 to Rs.12,000 and demand for rice increases from 30 to 40 kgs.
    \nAnswer:
    \nIncome elasticity of demand may be defined as the ratio or proportionate change in the quantity demanded of a commodity to a given proportionate change in the income. In short, it indicates the extent to which demand changes with a variation in consumers income.<\/p>\n

    The following formula helps to measure Yed<\/sub><\/p>\n

    \"2nd<\/p>\n

    Here, \u2206q stands for change in quantity, \u2206y is change in Income of consumer, \u2018y\u2019 is initial income and \u2018q\u2019 is initial quantity.<\/p>\n

    Solution:
    \n\u2206q = 40 -30 = 10;\u00a0 \u00a0 \u00a0 \u00a0\u2206y = 12,000 – 10,000 = 2000; then Yed<\/sub> is ;
    \n\"2nd<\/p>\n

    = 1.66 Therefore the Income Elasticity of Demand is greater than one.<\/p>\n

    Question 4.
    \nWhat are the factors determining price elasticity of demand?
    \nAnswer:
    \n(i) Nature of the Commodity:
    \nIn case of comforts and luxuries, demand tends to be elastic because people buy those more only when their prices are low. e.g. TV sets.<\/p>\n

    In case of necessaries, demand is inelastic because whatever may be the price, people have to buy and use them.\u00a0 \u00a0 \u00a0 e.g. Rice.<\/p>\n

    (ii) Existence of Substitutes:
    \nIf a product has substitutes, demand tends to become elastic because people compare tho prices of substitute goods and cheaper products are purchased, eg. Blades, Soaps.<\/p>\n

    If a product has no substitutes, demand becomes inelastic because in that case whatever may be the price,\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 people have to buy them. e.g. Onion.<\/p>\n

    (iii) Durability of the commodity:
    \nIf a product is perishable or non durable, demand tends to be inelastic, because people buy them again and again.
    \nIf a product is durable, demand tends to be elastic because people buy them occasionally.<\/p>\n

    (iv) Number of uses of a commodity:
    \nIf a product has multiple uses, demand tends to become elastic because, with a fall in price, the same product can be used for many purposes, e.g. Electricity, coal etc.<\/p>\n

    If a product has only one use, in that case demand becomes inelastic because people have to buy them for a\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 specific single purpose whatever may be the price, e.g. All eatables, seeds, fertilizers, pesticides etc.<\/p>\n

    (v) Possibility of postponing the use of product:
    \nIf there is a possibility to postpone the use of particular product, demand tends to become elastic, e.g. Buying a\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 scooter, motorcycle, TV sets etc. people generally buy these articles when they are cheaper. .<\/p>\n

    If it is not possible to postpone, demand tends to become inelastic. In this case, whatever may be the price,\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 people have to buy them. e.g. Medicine.<\/p>\n

    (vi) Level of income of the people:
    \nGenerally speaking, demand will be elastic in case of the poor people because even a small change in price will affect the demand for various products.<\/p>\n

    On the other hand demand will be inelastic in case of rich people because they are ready to spend any amount on buying a product.<\/p>\n

    (vii) Habits:
    \nIf people are not habituated for the use of certain products, then demand tends to be elastic. If products are cheaper, they buy more and if they become costly, they may buy less or may not buy them at all.<\/p>\n

    When people are habituated for the use of a particular commodity, they do not care for price changes over a\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 certain range, e.g. Cigarettes,, liquor etc. In that case, demand tends to become inelastic.<\/p>\n

    (viii) Complementary goods:
    \nGoods which are jointly demanded are inelastic in nature, e.g., ink and pens, vehicles and petrol etc. This is because, if people buy one product, they have to buy the supplementary products also without which they cannot make use of the first item.<\/p>\n

    Demand tends to be elastic in case of independent products, e.g., biscuits, chocolates, ice-creams etc. In this case, consumption or use of a product is not linked to any other products. Hence, they may or may not buy a\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 product.<\/p>\n

    \"KSEEB<\/p>\n

    2nd PUC Economics Demand Analysis Ten Marks Questions and Answers<\/h3>\n

    Question 1.
    \nExplain the law of demand with the help of demand schedule and demand curve.
    \nAnswer:
    \nThe law can be explained in the following manner: \u201cOther things being equal, a fall in price leads to expansion in demand and a rise in price leads to contraction in demand”.<\/p>\n

    According to Prof.Samuelson, the law of demand states that \u2018People buy more at lower prices and buy less at higher prices, other things remaining the same\u2019.<\/p>\n

    Demand schedule:
    \nDemand schedule represents the quantities demanded by an individual consumer at different levels of price.<\/p>\n

    \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Individual Demand Schedule<\/strong><\/p>\n\n\n\n\n\n\n\n\n
    \n

    Price P (in Rs.)<\/strong><\/p>\n<\/td>\n

    		\n

    Demand (Qd) (in Kg)<\/strong><\/p>\n<\/td>\n<\/tr>\n

    \n

    3<\/p>\n<\/td>\n

    		30<\/td>\n<\/tr>\n
    \n

    4<\/p>\n<\/td>\n

    		25<\/td>\n<\/tr>\n
    \n

    5<\/p>\n<\/td>\n

    		\n

    20<\/p>\n<\/td>\n<\/tr>\n

    6<\/sup><\/td>\n\n

    15<\/p>\n<\/td>\n<\/tr>\n

    7<\/td>\n\n

    10<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    In the above individual demand schedule, the consumer is purchasing different quantities at different price levels. At Rs.3 he buys 30 kgs, and at Rs. 4, 25 kgs are bought and so on. As the price increases, the quantities demanded falls.<\/p>\n

    Demand Curve: The graphical presentation of the demand schedule is called demand curved<\/p>\n

    \"2nd
    \n\"KSEEB<\/p>\n

    In the above diagram, price is measured along y axis and quantities demanded are measured along x axis. The various points on Demand line represent the respective quantities demanded. For example, point \u2018c\u2019, quantities demanded is 20 at price Rs.5.<\/p>\n

    The demand curve slopes downwards from left to right. It shows the rate at which demand changes with respect to change in price. As there is an inverse relationship between price and quantities demanded, the curve is negatively sloped.<\/p>\n

    Question 2.
    \nClassify the price elasticity of demand and explain them with diagrams.
    \nAnswer:
    \nIn the words of Prof. Stonier and Hague, \u201cPrice elasticity of demand is a technical term used by economists to describe the degree of responsiveness of the demand for a good to a change in its price.\u201d
    \nIt is measured by using the following formula.<\/p>\n

    \"2nd<\/p>\n

    The rate of change in demand may not always be proportionate to the change in price. A small change in price may lead to very great change in demand. It is called as Elastic Demand. Sometimes even a big change in price may not cause any change in demand. Such a demand is known as Inelastic Demand.<\/p>\n

    The following formula is used to calculate Price Elasticity of Demand (Ped<\/sub>):
    \n\"2nd
    \nHere, \u2206q stands for change in quantity, \u2206p is change in price, \u2018p\u2019 is the initial price and ‘q’ is the initial quantity.<\/p>\n

    Classification of Price Elasticity of Demand:
    \nOn the basis of the degree of price elasticity for different goods, we classify Ped<\/sub> as follows:<\/p>\n

    1. Perfectly Elastic Demand:
    \nIn this case, a very small change in price leads to an infinite change in demand. The demand curve is a horizontal curve and parallel to x axis. The numerical co-efficient of perfectly elastic demanded is infinity (ED = \u221e).<\/p>\n

    \"2nd<\/p>\n

    2. Perfectly Inelastic Demand:
    \nIn this case, whatever may be the change in price, quantity demanded will remain perfectly constant. The demand curve is a vertical straight line and parallel to Y axis. Quantity demanded would be 10 units, irrespective of price change from Rs. 10.00 to Rs.2.00. Hence, the numerical co-efficient of perfectly inelastic demand is zero. ED = 0.<\/p>\n

    \"2nd<\/p>\n

    3.Relatively Elastic Demand: More elastic demand.
    \nIn this case, a slight change in price leads to more than proportionate change in demand. One can notice here that a change in demand is more than that of change in price. Hence, the elasticity is greater than one. For e.g., price falls by 3% and demand rises by 9%. Hence, the numerical co-efficient of demand is greater than one.<\/p>\n

    \"2nd<\/p>\n

    Here, the percentage change in quantities demanded will be more than percentage change in price,\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 i.e., \u2206q > \u2206p. M M1<\/sub> > P P1<\/sub>.<\/p>\n

    4. Relatively Inelastic Demand: Less elastic demand. In this case, a large change in price, say 8% price fall, leads to less than proportionate change in demand: say 4% rise in demand. One can notice here that change in demand is less than that of change in price. This can be represented by a steeper demand curve. Here, elasticity is less than one. (Ped<\/sub> <1)<\/p>\n

    \"2nd<\/p>\n

    Here, the percentage change in quantities demanded will be less than percentage change in price, i.e., \u2206q > \u2206p, M M1 <\/sub>> P P1<\/sub><\/p>\n

    5. Unitary Elastic Demand:
    \nIn this case, proportionate change in price leads to Equal proportionate change in demand. For e.g., 5% fall in price leads to exactly 5% increase in demand. Hence, elasticity is equal to unity. It is possible to come across unitary elastic demand, but it is a rare phenomenon.<\/p>\n

    \"2nd<\/p>\n

    Here, the percentage change in quantities demanded will be equal to percentage change in price.\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 i.e., \u2206q > \u2206p, M M 1<\/sub> > P P1.<\/sub><\/p>\n

    Out of the five different degrees, the first two are theoretical and the last one is a rare possibility. Hence, in all our general discussions, we make reference only to two terms- relatively classic demand and relatively inelastic demand.<\/p>\n

    \"KSEEB<\/p>\n","protected":false},"excerpt":{"rendered":"

    You can Download Chapter 3 Demand Analysis Questions and Answers, Notes, 2nd PUC Economics Question Bank with Answers Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations. Karnataka 2nd PUC Economics Question Bank Chapter 3 Demand Analysis 2nd PUC Economics Demand Analysis One Mark Questions and Answers …<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[82],"tags":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/posts\/10133"}],"collection":[{"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/comments?post=10133"}],"version-history":[{"count":0,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/posts\/10133\/revisions"}],"wp:attachment":[{"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/media?parent=10133"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/categories?post=10133"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/tags?post=10133"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}