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Correct option: (4) a

Correct option: (1) b, c and d

(1) Demand 

(2) Individual Demand 

(3) Market Demand 

(4) Contraction in Demand 

(5) Expansion in Demand 

(6) Complementary or Joint Demand 

(7) Increase in Demand 

(8) Decrease in Demand 

(9) Giffens Goods

(10) Direct Demand 

(11) Indirect Demand 

(12) Joint or Complementary Demand

(1) desire

(2) demand 

(3) individual demand 

(4) market demand

(5) direct demand 

(6) ability to pay 

(7) composite demand 

(8) Demand and Price 

(9) Giffen goods 

(10) Prestige goods 

(11) variation in demand 

(12) increase in demand

(1) Uselessness 

(2) Coffee 

(3) Fertilizer 

(4) Flowers 

(5) Pen and Pencil 

(6) Individual demand 

(7) Consumer demand 

(8) Car – Fuel 

(9) Chilli powder 

(10) Aluminiu

When goods are demanded so that they can be used in the production of some other commodities, it is called indirect or derived demand. Factors of production have an indirect or derived demand, as they are used in the production of goods meant for final consumption. For example, labour is a factor of production. However, labour would be demanded according to the demand of the commodity in the production of which it would be used. For example demand for labour in furniture producing firm would depend on the demand for furniture. The greater the demand for furniture, the production of furniture would tend to rise, thereby, the demand for labour used in the production of furniture would also increases.

FALSE 

Desires refer to those wishes that a human being cherishes such as to walk on the moon, to be a billionaire and to buy a Rolls-Royce. These wishes may not always be backed by enough finance to realise them. It is only when a desire is backed by sufficient purchasing power, along with the consumer’s readiness to spend on materialising the wish, it becomes demand. Thus, until a consumer has sufficient money and he/she is willing to spend, a desire will remain a desire.

(1)-(d), (2)-(a), (3)-(e), (4) – (c).

Correct option: (2) a, b and c

Correct option: (i) (A) is true but (R) is false.

Wrong pair : Direct demand – Factors production

Correct option: (3) a and b

(iv) Both (A) and (R) is true but (R) is not the correct explanation of (A).

Quantity demanded has an inverse relation with the price of a commodity. Other things remaining constant, as the price of the commodity increases, the quantity demanded decreases, and vice-versa.

The law can be explained in the following manner: “Other things being equal, a fall in price leads to expansion in demand and a rise in price leads to contraction in demand”.

Normal goods are those goods for which the demand increases with rise in income of consumers , and decreases with fall in their income.

Option : (a) direct

There 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).

I Disagree with the statement. 

Reason : 

When price of Giffen goods falls, the demand for its decreases. 

Inferior goods or low-quality goods are those goods whose demand does not rise even if their price falls. At times, demand decreases when the price of such commodities fall. Sir Robert Giffen observed this behaviour in England in relation to bread declined, people did not buy more because of an increase in their real income or purchasing power. They preferred to buy superior-good like meat. This is known as Giffen’s paradox.

Complementary 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.

Yes, I agree with this statement.

• Desire means an individual’s wish to acquire a commodity.
• In economics, demand means desire which is backed by willingness and ability to pay.
• Symbolically, Demand = Desire + Ability to pay + Willingness to pay
• All desires may not be backed by ability to pay and willingness to pay.
• Therefore, all desires are not demand.

We know that, according to the Law of Demand, when the price of a commodity falls the demand for it rises. However, giffen goods are an exception to this Law. In case of giffen goods, the demand shares a positive relationship with price. As the price of giffen goods fall the demand for such goods falls. This is because as the price falls, the real income of the consumer rises and thereby, the consumer shifts to better superior quality goods. Such goods are highly inferior goods. It is named after the 19th century British economist, Sir Robert Giffen, who found that when the price of bread fell, the demand for it also fell.

Wrong pair : Increase in real income Decrease in demand

Wrong pair : Increase in demand Unfavourable changes in other factors

When less is purchased at the constant price, it is called decrease in demand.

Explanation:

Decrease in demand is a condition when the demand for good decreases due to a change in factor other than the price of the commodity. Accordingly, less is purchased even when the price is constant. Some of the factor causing decrease in demand are decrease in income, moving of taste and preferences away from the commodity and rise in prices of other goods.

Correct option: (2) a, b and d

Yes, I agree with this statement.

Meaning of Demand : Demand refers to a desire or want for goods. Desire is the willingness to have some commodity which is backed by willingness and ability to pay. 

Definition : According to Benham, “The demand for anything at a given price is the amount of it, which will be bought per unit of time at that price.

Features of Demand :

1. Demand is a relative concept. 

2. Demand is essentially expressed with reference to time and price.

Determinants of Demand :

1. Price of Complementary Goods : Demand changes with changes in price of complementary goods like car and petrol, etc.

2. Advertisement : Effective advertisement and sales promotion will lead to greater demand of product. E.g. cosmetics, toothbrush, etc. 

3. Price : Demand for a commodity is mainly influenced by its price. Normally at a higher price the demand is less and at a lower price it is more. Thus, demand varies inversely with price of a commodity. 

4. Taste, Habits and Fashions : Habits influence market demand. If people habituated to the consumption of certain goods they will not give up such habits easily. E.g. demand for liquor, cigarettes, etc. Sometimes fashion change attitude and preference of people which in turn changes market demand. 

5. Income: Income determines the purchasing power. Rise in income will lead to a rise in demand of a commodity and fall in income will lead to a fall in demand of a commodity.

6. Other Factors : 

(a) Climatic condition, 

(b) Changes in technology, 

(c) Government policy, 

(d) Customs and traditions, etc.

7. Nature of Product: Under necessary and unavailable circumstances the demand of a commodity will continue to be same irrespective of the corresponding price. E.g. medicine to control blood-pressure. 

8. Level of Taxation : There would be increase in price of goods and services due to high rates of taxes which results in a decrease in demand and viceversa. 

9. Expectation about the Future Prices : If the consumer expect a rise in price in the near future they will demand more at present price. Similarly, when they expect price to fall, then they will buy less at present prices. 

10. Price of Substitute Goods : Demand for cheaper substitute goods will rise when there is fall in price of such goods. E.g. when sugar price rises, then the demand for jaggery will rise. 

11. Size of Population: Demand for commodity depends upon size and composition of population like age structure, gender ratio which influence demand for certain goods. E.g. larger the child population, more will be the demand for toys, chocolates, etc.

Correct option: (3) c

Correct option: (ii) (A) is false but (R) is true.

Meaning of Demand : Demand refers to a desire or want for goods. Desire is the willingness to have some commodity which is backed by willingness and ability to pay. Definition : According to Benham,"The demand for anything at a given price is the amount of it, which will be bought per unit of time at that price.

Features of Demand :

1. Demand is a relative concept. 

2. Demand is essentially expressed with reference to time and price.?

Determinants of Demand :

1. Price of Complementary Goods : Demand changes with changes in price of complementary goods like car and petrol, etc.

2. Advertisement : Effective advertisement and sales promotion will lead to greater demand of product. E.g. cosmetics, toothbrush, etc.

3. Price : Demand for a commodity is mainly influenced by its price. Normally at a higher price the demand is less and at a lower price it is more. Thus, demand varies inversely with price of a commodity.

4. Taste, Habits and Fashions : Habits influence market demand. If people habituated to the consumption of certain goods they will not give up such habits easily. E.g. demand for liquor, cigarettes, etc. Sometimes fashion change attitude and preference of people which in turn changes market demand.

5. Income : Income determines the purchasing power. Rise in income will lead to a rise in demand of a commodity and fall in income will lead to a fall in demand of a commodity.

6. Other Factors : (a) Climatic condition, (b) Changes in technology, (c) Government policy, (d) Customs and traditions, etc.

7. Nature of Product : Under necessary and unavailable circumstances the demand of a commodity will continue to be same irrespective of the corresponding price. E.g. medicine to control blood-pressure.

8. Level of Taxation : There would be increase in price of goods and services due to high rates of taxes which results in a decrease in demand and vice-versa.

9. Expectation about the Future Prices : If the consumer expect a rise in price in the near future they will demand more at present price. Similarly, when they expect price to fall, then they will buy less at present prices.

10. Price of Substitute Goods : Demand for cheaper substitute goods will rise when there is fall in price of such goods. E.g. when sugar price rises, then the demand for jaggery will rise.

11. Size of Population : Demand for commodity depends upon size and composition of population like age structure, gender ratio which influence demand for certain goods. E.g. larger the child population, more will be the demand for toys, chocolates, etc.

(A). (1). Expansion or Extension.

(2). Downward.

(B). (1). Constraction.

(2). Upward.

Concept: Composite demand

Explanation : Composite demand refers to the demand for a commodity which can be put to several uses.

Demand for electricity is rising due to more industries, increase in household consumption etc.

Due to urbanization and industrialization many people are getting migrated to Mumbai and thus the consumption of electricity in increasing day by day.

Correct option: (3) a, b, c and d

Desires refer to those wishes that a human being cherishes such as to walk on the moon, to be a billionaire and to buy a Rolls-Royce. These wishes may not always be backed by enough finance to realise them. It is only when a desire is backed by sufficient purchasing power, along with the consumer’s readiness to spend on materialising the wish, that it becomes demand. Thus, until a consumer has sufficient money and he/she is willing to spend, a desire will remain a desire. Thus, we can say that all desires are not demand.

Demand:

1. Demand is a micro concept. 

2. It refers to that quantity of a commodity which a person is ready to buy at a particular price and during a specific period of time.

Aggregate Demand:

1. Aggregate demand is a macro concept. 

2. It refers to the total amount of sales proceeds which an entrepreneur actually expects from the sale of output produced at a given level of employment during the year.

1. Increase in demand (D₁D₁). 

2. Decrease in demand (D₂D₂). 

3. Constant. 

4. Change in demand.

The concept ‘demand’ 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.

The method of adding two individual demand curves is ‘Horizontal summation’.

The shift in demand curve occurs because of changes in all the determinants of demand except price.

Market demand for a commodity depends on the following factors:

1. Market price of the good - Other things remaining constant, as the market price of a good rises (or falls), the quantity demanded of the good falls (or rises). Thus, the market price of a good and quantity demanded of that good share a negative relationship. 

2. Market price of other goods – The quantity demanded of a good also depends on the market price of other goods (i.e., related goods). Any two goods are considered to be related to each other when the demand for one good change in response to the change in the market price of the other good. Related goods can be classified into the following categories: 

a. Substitute Goods - In case of substitute goods, if the price of one good increases, the consumer shifts his demand towards the other (substitute) good; that is, a rise in the price of one good results in the rise in the demand of the other good and vice versa. 

b. Complementary goods - In case of complementary goods, if the price of one good increases, the consumer reduces his demand for the complementary good as well; that is, a rise in the price of one good results in the fall in the demand for the other good and vice versa. 

3. Income of the consumer - Change in the income of the consumer also affects the market demand for goods. The effect of change in income on the market demand depends on the type of the good. 

4. Type of Good: The market demand for normal goods shares a positive relationship with the consumer's income. The market demand for inferior goods (such as coarse cereals) has a negative relationship with the consumer's income. The market demand for Giffen goods also has a negative relationship with the income. 

5. Consumer’s tastes and preferences - Consumers' tastes and preferences highly influence the demand for goods. Other things being constant, if all consumers prefer a commodity over another, then the market demand for that commodity increases and vice versa. 

6. Population size - The market demand for a commodity is also affected by the population size. Other things being equal, an increase in the population size increases the market demand for a commodity and a decrease in the population size decreases the market demand for a commodity. This is because with the change in population size, the number of consumers in the market changes; thus, the market demand also changes. 

7. Distribution of income - If the distribution of income in the society is fair and equal, then the demand for a commodity is more compared to a situation where there is unequal distribution of income.

In Qd = f(p), the independent variable is ‘p’ (price).

Concept: Competitive Demand

Explanation : Competitive Demand refers to demand for those goods which substitute for each other.

Change in the price of one commodity can affect the demand for substitute goods. Ramesh has found price of coffee at very high level, thus he bought tea powder.

Elasticity of demand is generally defined as the responsiveness or sensitiveness of demand to a given change in the price of commodity.

(1)-(b), (2)-(a), (3)-(d), (4)-(c).

(2) Joint demand Tea-coffee

(1)-(d), (2)-(c), (3)-(b), (4)-(a).

(1) – (e), (2) – (d), (3) – (c), (4) – (b).

Types of Demand:

1. Direct Demand : When a commodity satisfies the want of a consumer directly, it is said to have direct demand. Demand for consumer goods like food, clothes, sugar, vegetables, milk, etc.

2. Indirect Demand : It refers to demand for goods which are required for further production. It is also called as derived demand. Demand for factors of production like land, labour, capital, etc.

3. Joint or Complementary Demand : When two or more goods are demanded at a same time to satisfy single want, it is known as Joint or Complementary Demand. E.g. car and fuel, pen and ink, mobile phone and sim card, etc.

4. Composite Demand : When one commodity can be utilize for several needs or multiple uses, it is known as composite demand. E.g. electricity, steel, coal, etc. 

5. Competitive Demand : It is demand for those goods which are substitute for each other. E.g. tea or coffee, sugar or jaggery, pepsi or Thumsup, etc.