Q7 of 50 Page 1

What will be the effect of a 10 per cent rise in the price of a good on its demand if the price elasticity of demand is (a) Zero, (b) 21, (c) 22?

a)Zero :


The elasticity of demand = Percentage change in quantity demand/Percentage change in price


0 = Percentage change in quantity demand/10


Percentage change in quantity demand = 0


B) 21


Elasticity of demand = Percentage change in quantity demand/Percentage change in price


21 = Percentage change in quantity demand/10


Percentage change in quantity demand = 210


10 percent.


c) 22


Elasticity of demand = Percentage change in quantity demand/Percentage change in price


22 = Percentage change in quantity demand/10


Percentage change in quantity demand = 220


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5

Demand curve of a firm is perfectly elastic under : (Choose the correct alternative)

(a) Perfect competition


(b) Monopoly


(c) Monopolistic competition


(d) Oligopoly

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A consumer consumes only two goods X and Y. Marginal utilities of X and Y are 3 and 4 respectively. Prices of X and Y are ` 4 per unit each. Is consumer in equilibrium? What will be the further reaction of the consumer ? Give reasons.

 8

What is the minimum price ceiling? Explain its implications.

OR


If the prevailing market price is above the equilibrium price, explain its chain of effects.

 9

Define demand. Name the factors affecting market demand.