Topic 1: Meaning of Demand
Q1.
Riya wants to buy a laptop priced at ₹50,000 but currently has only ₹5,000 and cannot arrange the remaining money. Which statement best explains the situation?
A. Riya’s desire automatically becomes demand.
B. Riya has a desire but not effective demand because she cannot buy the laptop.
C. Riya has demand because she likes the laptop.
D. Riya’s demand is determined only by the laptop’s quality.
Q2.
A student is willing and able to buy two notebooks at ₹50 each during the current month. Which information is most important for identifying this as demand?
A. The student’s favourite notebook brand
B. The colour of the notebook
C. The student’s willingness and ability to purchase at a particular price and time
D. The number of notebooks produced by the company
Q3.
A child says, “I want to buy a bicycle, but I have no money and cannot borrow any.” What is the best economic interpretation?
A. It is a desire, but not effective demand.
B. It is effective demand because the child wants the bicycle.
C. It is supply because the bicycle is available.
D. It is equilibrium because no purchase has occurred.
Q4.
Two students want the same ₹2,000 school bag. Aarav has ₹2,000 and is ready to buy it, while Kabir has no money and cannot arrange it. Which conclusion is most appropriate?
A. Both have equal demand because both want the bag.
B. Neither has demand because neither has purchased it yet.
C. Kabir has greater demand because he wants it more.
D. Aarav has effective demand because he is both willing and able to buy it.
Q5.
A family plans to buy 10 kg of rice next week at the prevailing market price. Which factor makes this information useful for understanding demand?
A. It identifies a willingness and ability to purchase a specific quantity at a particular time and price.
B. It tells us how much rice producers will supply.
C. It tells us the equilibrium quantity automatically.
D. It shows that rice is a luxury good.
Topic 2: Law of Demand
Q6.
The price of a school bag falls from ₹1,000 to ₹800, while other relevant factors remain unchanged. What would the law of demand generally suggest?
A. Quantity demanded will decrease.
B. Quantity demanded will increase.
C. Quantity supplied will necessarily decrease.
D. Demand will become zero.
Q7.
A shop reduces the price of a particular water bottle. More students decide to buy it, assuming other factors remain unchanged. Which principle best explains this?
A. Law of supply
B. Market failure
C. Law of demand
D. Price ceiling
Q8.
The price of apples increases while other relevant factors remain unchanged. According to the law of demand, what is the most likely response?
A. Quantity demanded will generally fall.
B. Quantity demanded will definitely rise.
C. Supply will necessarily fall to zero.
D. A surplus must immediately occur.
Q9.
A student says, “If the price of a product rises, consumers will always buy less, whatever the circumstances.” Why is this statement too broad?
A. Price never affects buying decisions.
B. Supply determines every consumer decision.
C. All goods behave exactly like luxury goods.
D. The simple law of demand assumes other relevant factors remain unchanged, and real-world behaviour can sometimes differ.
Q10.
The price of a product falls, and its quantity demanded rises while other relevant factors remain unchanged. Which relationship is being demonstrated?
A. An inverse relationship between price and quantity demanded
B. A direct relationship between price and quantity demanded
C. A relationship between supply and production cost
D. A relationship between taxes and public goods
Topic 3: Demand Schedule and Demand Curve
Q11.
A demand schedule shows that consumers are willing to buy 10 units at ₹100 and 20 units at ₹80, with other factors unchanged. What does this information illustrate?
A. Supply increasing with price
B. Quantity demanded changing as price changes
C. A price ceiling
D. A market failure
Q12.
A demand curve is constructed from a demand schedule. If price is placed on the vertical axis and quantity demanded on the horizontal axis, what would normally happen as we move along the demand curve?
A. Both price and quantity demanded necessarily rise.
B. Both price and quantity demanded necessarily fall.
C. Price rises while quantity demanded generally falls.
D. Price remains constant while quantity demanded changes.
Q13.
A student observes two points on a demand curve: at ₹40, consumers demand 30 units; at ₹20, they demand 50 units. What can be reasonably concluded?
A. Lower price is associated with higher quantity demanded, other factors being unchanged.
B. Higher price always creates higher demand.
C. Producers are supplying fewer goods.
D. The market has necessarily failed.
Q14.
Why is a demand schedule useful before drawing a demand curve?
A. It directly calculates profit.
B. It identifies public goods.
C. It establishes a price ceiling.
D. It provides numerical price and quantity-demanded combinations that can be represented graphically.
Q15.
A shopkeeper records the following observations:
| Price | Quantity demanded |
| ₹100 | 10 |
| ₹80 | 15 |
| ₹60 | 22 |
What is the strongest conclusion?
A. Quantity demanded decreases as price decreases.
B. Quantity demanded generally increases as price decreases.
C. Supply must be increasing.
D. The market is necessarily experiencing shortage.
Topic 4: Meaning of Supply
Q16.
A bakery is prepared to sell 500 loaves at the current market price. Which concept does this situation mainly describe?
A. Demand
B. Public goods
C. Supply
D. Information asymmetry
Q17.
A producer says, “I can produce 1,000 units, but at the current price I am willing to sell only 600 units.” Which quantity is more relevant to the concept of supply?
A. The 600 units the producer is willing to sell at that price
B. The 1,000 units the producer could possibly produce
C. The quantity consumers desire
D. The quantity sold last year
Q18.
A farmer has 100 kg of vegetables available but decides not to bring them to the market because the prevailing price is too low. What does this show?
A. All available production automatically becomes supply.
B. Supply depends partly on the producer’s willingness to sell at a given price.
C. Demand determines the farmer’s total production automatically.
D. The vegetables have become public goods.
Q19.
A company has enough capacity to produce 10,000 units but offers only 6,000 units for sale at the current price. What should an economist focus on when measuring supply?
A. Total production capacity only
B. The number of workers employed
C. The amount of raw material owned
D. The quantity the producer is willing to offer for sale at that price
Q20.
Why is it incorrect to say that “everything a producer owns is automatically supply”?
A. Supply refers to goods offered or intended to be offered for sale under particular market conditions, not simply everything owned.
B. Producers never own goods.
C. Supply applies only to consumers.
D. Ownership and production are always identical.
Topic 5: Law of Supply
Q21.
The price of a product rises while other relevant factors remain unchanged. According to the law of supply, what is the general expected response?
A. Quantity supplied will decrease.
B. Quantity supplied will increase.
C. Demand will automatically become zero.
D. Consumers will stop buying all goods.
Q22.
A farmer observes that the market price of tomatoes has increased. If other relevant factors remain unchanged, which response is consistent with the law of supply?
A. The farmer may be willing to supply more tomatoes.
B. The farmer must supply fewer tomatoes.
C. Consumers’ demand must become zero.
D. The market must immediately experience a shortage.
Q23.
Why does the law of supply generally show a positive relationship between price and quantity supplied?
A. Consumers always prefer higher prices.
B. Higher prices generally provide producers greater incentive to offer more for sale, other factors remaining unchanged.
C. Higher prices eliminate all production costs.
D. Supply is unrelated to price.
Q24.
A student claims, “Whenever the price rises, supply will rise in every possible situation.” What is the best correction?
A. Price never affects supply.
B. Supply always falls when price rises.
C. The law of supply describes the general relationship under the assumption that other relevant factors remain unchanged.
D. Supply depends only on consumers.
Q25.
A producer offers 100 units at ₹20 and 150 units at ₹30, with other relevant factors unchanged. What does this example illustrate?
A. An inverse relationship between price and quantity supplied
B. A direct relationship between price and quantity supplied
C. A relationship between price and public goods
D. A market failure
Topic 6: Supply Schedule and Supply Curve
Q26.
A supply schedule records the quantities producers are willing to sell at different prices. Why is it useful?
A. It shows the relationship between price and quantity supplied.
B. It measures consumer income.
C. It identifies every market failure.
D. It determines taxes automatically.
Q27.
A supply schedule shows:
| Price | Quantity supplied |
| ₹10 | 20 |
| ₹20 | 35 |
| ₹30 | 50 |
What pattern is most clearly visible?
A. Quantity supplied falls as price rises.
B. Quantity demanded rises as price rises.
C. Quantity supplied rises as price rises.
D. Price and supply are unrelated.
Q28.
If a supply curve is drawn with price on the vertical axis and quantity supplied on the horizontal axis, which direction would it generally slope?
A. Downward from left to right
B. Upward from left to right
C. Completely horizontal in every case
D. Completely vertical in every case
Q29.
A producer moves from a point representing ₹50 and 100 units to a point representing ₹70 and 140 units on the same supply curve. What has most directly changed?
A. Quantity supplied due to a change in price
B. Consumer income
C. The definition of supply
D. The type of good
Q30.
Why can a supply schedule be converted into a supply curve?
A. A schedule contains only qualitative information.
B. A schedule contains price-quantity supplied combinations that can be plotted as points on a graph.
C. Supply curves do not use numerical information.
D. Supply schedules show only demand.
Topic 7: Equilibrium Price and Equilibrium Quantity
Q31.
At a particular price, quantity demanded is 500 units and quantity supplied is also 500 units. What does this situation represent?
A. Shortage
B. Surplus
C. Equilibrium
D. Black market
Q32.
Why is the equilibrium price important in a basic market model?
A. It is the price at which quantity demanded and quantity supplied are equal.
B. It guarantees that every consumer gets the product.
C. It means the government has fixed the price.
D. It means producers earn maximum profit in every situation.
Q33.
Suppose consumers want to buy 800 units while producers are willing to sell 800 units at ₹40. What is the equilibrium quantity?
A. 40 units
B. 800 units
C. 1,600 units
D. Zero units
Q34.
A market reaches a price at which there is neither excess demand nor excess supply. Which conclusion is most appropriate?
A. The market has a shortage.
B. The market has a surplus.
C. The government must have imposed a price ceiling.
D. The market is at equilibrium.
Q35.
At ₹60, quantity demanded is 300 units and quantity supplied is 500 units. At ₹40, quantity demanded is 500 units and quantity supplied is 300 units. Which price represents equilibrium, based on the information given?
A. ₹60
B. ₹40
C. Both ₹40 and ₹60
D. Neither price
Topic 8: Surplus and Shortage
Q36.
At ₹100, consumers want 200 units while producers offer 350 units. What condition exists?
A. Shortage of 150 units
B. Equilibrium
C. Surplus of 150 units
D. Black market
Q37.
At a particular price, quantity demanded is greater than quantity supplied. What does this indicate?
A. Surplus
B. Shortage
C. Equilibrium
D. Public good
Q38.
A shop has 500 units available for sale, but consumers want only 300 units at the current price. What is the immediate market condition?
A. Shortage of 200 units
B. Equilibrium at 800 units
C. Surplus of 200 units
D. Information asymmetry
Q39.
A shortage exists because consumers want 900 units while sellers offer only 600 units. What is the size of the shortage?
A. 300 units
B. 600 units
C. 900 units
D. 1,500 units
Q40.
Why can a surplus put pressure on sellers to reconsider their prices in a basic market model?
A. More goods are demanded than supplied.
B. Goods are available in excess of what consumers want at that price.
C. Consumers have no choice.
D. The government must always buy the surplus.
Topic 9: Changes in Demand and Their Effect on Equilibrium
Q41.
Suppose people’s willingness to buy a product increases at existing prices. If supply conditions remain unchanged, what is the likely effect on equilibrium?
A. Equilibrium price and quantity may rise.
B. Equilibrium price and quantity must both fall.
C. Equilibrium quantity must become zero.
D. Supply must automatically disappear.
Q42.
A popular health campaign increases consumers’ willingness to buy a particular healthy food. If supply conditions remain unchanged, what is the most likely market effect?
A. Demand decreases and equilibrium quantity falls.
B. Demand increases, putting upward pressure on equilibrium price and quantity.
C. Supply becomes a public good.
D. The market necessarily develops a price ceiling.
Q43.
Demand for a product decreases while supply conditions remain unchanged. Which outcome is generally expected?
A. Equilibrium price and quantity tend to fall.
B. Equilibrium price rises and quantity rises.
C. Equilibrium quantity necessarily becomes zero.
D. Supply automatically increases.
Q44.
A product becomes less popular among consumers. If producers’ supply conditions remain unchanged, what is likely to happen in the market?
A. Demand increases.
B. Equilibrium price and quantity tend to decrease.
C. Supply becomes perfectly unlimited.
D. A surplus is impossible.
Q45.
Which situation best represents a change in demand rather than merely a movement along the existing demand curve?
A. Consumers buy more because the product’s own price falls.
B. Consumers buy less because the product’s own price rises.
C. Consumers become more willing to buy the product because of a change in a relevant factor other than its own price.
D. Producers increase the quantity supplied because price rises.
Topic 10: Changes in Supply and Their Effect on Equilibrium
Q46.
Suppose producers become able and willing to offer more of a product at existing prices. If demand remains unchanged, what is the likely effect?
A. Equilibrium price tends to fall and equilibrium quantity tends to rise.
B. Equilibrium price and quantity both necessarily rise.
C. Equilibrium quantity becomes zero.
D. Demand automatically falls.
Q47.
Improved production methods allow producers to offer more goods at existing prices. If demand remains unchanged, what is the most likely result?
A. Supply decreases.
B. Equilibrium price tends to fall while equilibrium quantity tends to rise.
C. Demand becomes zero.
D. A price ceiling is automatically created.
Q48.
A disruption reduces the quantity producers are willing to offer at existing prices. If demand remains unchanged, what is the likely market effect?
A. Equilibrium price tends to rise and equilibrium quantity tends to fall.
B. Equilibrium price and quantity both rise.
C. Equilibrium price must fall to zero.
D. Demand automatically increases.
Q49.
A student says, “An increase in supply always increases both equilibrium price and quantity.” Which response is most appropriate?
A. Correct, because supply determines price alone.
B. Correct, because consumers never respond to price.
C. Incorrect; an increase in supply generally puts downward pressure on equilibrium price while increasing equilibrium quantity, assuming demand is unchanged.
D. Incorrect because supply has no effect on equilibrium.
Q50.
Which situation most clearly represents an increase in supply?
A. Consumers decide to buy more at every given price.
B. Producers become willing to offer more at existing prices because production conditions improve.
C. Consumers buy less because the price rises.
D. Consumers change their preferences.
Topic 11: Real-World Deviations — Necessities, Luxury Goods, Perishables and Expectations
Q51.
The price of an essential medicine rises considerably, but people still need to purchase it. Which category best helps explain why the simple response to price may be different from that for some other goods?
A. Necessity
B. Public good
C. Luxury good
D. Perishable good
Q52.
A family postpones buying an expensive designer watch when its price rises because the purchase is not essential. Which type of good does this example most closely represent?
A. Necessity
B. Luxury good
C. Public good
D. Perishable good
Q53.
A vegetable seller expects prices to fall sharply tomorrow and therefore decides to sell more of the stock today. Which factor is influencing the seller’s market decision?
A. Public ownership
B. Consumer income only
C. Expectations about future prices
D. Information asymmetry only
Q54.
A fruit seller has highly perishable fruit and cannot store it for a long period. Why might the seller behave differently from a seller of durable goods?
A. Perishable goods may need to be sold quickly because they can spoil.
B. Perishable goods are always public goods.
C. Perishable goods have no price.
D. Perishable goods cannot be demanded.
Q55.
Which statement best explains why the simple law of demand should not be treated as a perfect description of every real-world situation?
A. Price never influences demand.
B. Some real-world situations, such as necessities, perishables and expectations about future prices, can lead to behaviour that differs from the simple textbook relationship.
C. Demand and supply are always equal.
D. Consumers never make decisions based on price.
Topic 12: Price Ceilings and Shortages
Q56.
The government sets a maximum legal price below the market equilibrium price for a product. What is this policy called?
A. Price ceiling
B. Price floor
C. Equilibrium pricing
D. Supply schedule
Q57.
A price ceiling is imposed below the equilibrium price. What problem can arise if consumers want more at that controlled price than producers are willing to supply?
A. Surplus
B. Equilibrium
C. Shortage
D. Unlimited supply
Q58.
Suppose a controlled price is kept below the equilibrium price. At that price, quantity demanded is 1,000 units while quantity supplied is 600 units. What is the likely result?
A. Surplus of 400 units
B. Shortage of 400 units
C. Equilibrium at 1,600 units
D. No market effect
Q59.
Why can a price ceiling below equilibrium create difficulty for consumers?
A. It can make quantity demanded exceed quantity supplied.
B. It guarantees that every consumer will obtain the product.
C. It always increases supply.
D. It removes scarcity.
Q60.
A government wants to keep an essential product affordable and sets a maximum legal price below the market equilibrium price. Which trade-off should policymakers consider?
A. The policy can improve affordability for some consumers but may also create shortages if supply does not meet demand.
B. The policy guarantees unlimited supply.
C. The policy eliminates demand.
D. The policy makes equilibrium impossible in every market.
Topic 13: Black Markets
Q61.
A legally enforced price ceiling creates a shortage. Some sellers then secretly sell the product at a price higher than the legal maximum. What is this situation commonly associated with?
A. Equilibrium
B. Black market
C. Public good
D. Supply schedule
Q62.
Why might a black market emerge when a strict price ceiling creates a shortage?
A. Excess supply makes sellers give goods away.
B. The shortage creates an unmet demand, encouraging some transactions outside the legal price system.
C. Demand completely disappears.
D. Supply becomes unlimited.
Q63.
A product is legally priced at ₹50 under a price ceiling, but some sellers secretly offer it for ₹80 because many buyers cannot obtain it at ₹50. What does this situation illustrate?
A. Equilibrium pricing
B. A supply schedule
C. Black-market activity associated with shortage
D. Public-good provision
Q64.
Which chain of events best explains how a black market may develop?
A. Price ceiling below equilibrium → shortage → unmet demand → illegal or unofficial higher-price transactions
B. Price ceiling above equilibrium → surplus → no buyers → black market automatically
C. Higher supply → lower shortage → black market disappears automatically in every case
D. Lower demand → equilibrium → black market
Q65.
Why is a black market generally connected with the problem of shortage rather than surplus?
A. A shortage creates buyers who are unable to obtain the product through the normal legal market at the controlled price.
B. A surplus means consumers have no goods available.
C. A shortage means producers have too many unsold goods.
D. Surplus always creates illegal transactions.
Topic 14: Market Failures — Externalities and Information Asymmetry
Q66.
A factory produces a product but its production creates pollution that harms nearby residents who are not directly involved in the transaction. Which concept best describes this wider effect?
A. Equilibrium
B. Negative externality
C. Demand schedule
D. Price ceiling
Q67.
A person’s decision creates benefits for other people who are not directly involved in the transaction. Which concept does this illustrate?
A. Shortage
B. Surplus
C. Positive externality
D. Black market
Q68.
A used-car seller knows that a car has serious hidden problems, while the buyer does not know about them before purchasing. Which concept is most directly involved?
A. Information asymmetry
B. Equilibrium
C. Price ceiling
D. Public good
Q69.
Why can information asymmetry create a market problem?
A. All buyers and sellers always have exactly the same information.
B. Unequal information can affect decisions and may lead to inefficient or unfair market outcomes.
C. It guarantees equilibrium.
D. It always creates a surplus.
Q70.
Which situation best demonstrates market failure?
A. A market outcome creates pollution costs for people outside the transaction, which are not fully reflected in the market decision.
B. Quantity demanded equals quantity supplied.
C. A demand schedule is prepared correctly.
D. A seller changes quantity supplied when price changes.
Topic 15: Public Goods
Q71.
Street lighting is provided in a neighbourhood and one person’s use of the lighting does not normally prevent others from benefiting from it. Which concept is most relevant?
A. Private good
B. Public good
C. Luxury good
D. Perishable good
Q72.
A public park can be enjoyed by many people, and excluding individual people from using it may be difficult in the usual circumstances. Which feature is being highlighted?
A. Scarcity of information
B. Price ceiling
C. Non-excludability
D. Black-market pricing
Q73.
Which combination best describes the commonly taught characteristics of public goods?
A. Rival and easily excludable
B. Non-rival and non-excludable
C. Perishable and luxurious
D. Scarce and privately owned
Q74.
Suppose one person’s enjoyment of street lighting does not significantly reduce another person’s ability to benefit from the same lighting. Which characteristic is illustrated?
A. Non-rivalry
B. Information asymmetry
C. Shortage
D. Price ceiling
Q75.
Why can public goods create a challenge for markets?
A. They are always luxury goods.
B. They cannot provide benefits to more than one person.
C. Their non-excludable and non-rival nature can make it difficult for ordinary market transactions alone to ensure their provision.
D. Their prices are always above equilibrium.
Detailed Answer Key
Topic 1 — Meaning of Demand
| Q | Answer | Explanation |
| 1 | B | A mere desire is not effective demand when the person lacks the ability to purchase. |
| 2 | C | Demand involves willingness and ability to buy a particular quantity at a given price and time. |
| 3 | A | Wanting something without the ability to purchase it is a desire, not effective demand. |
| 4 | D | Aarav both wants and can purchase the bag. |
| 5 | A | The statement specifies willingness, ability, quantity, time and price conditions. |
Topic 2 — Law of Demand
| Q | Answer | Explanation |
| 6 | B | With other relevant factors unchanged, a lower price generally increases quantity demanded. |
| 7 | C | More quantity is purchased following a price reduction, illustrating the law of demand. |
| 8 | A | The law of demand generally shows an inverse relationship between price and quantity demanded. |
| 9 | D | The simple law assumes other relevant factors remain unchanged and does not describe every real-world situation perfectly. |
| 10 | A | Price and quantity demanded generally move in opposite directions. |
Topic 3 — Demand Schedule and Demand Curve
| Q | Answer | Explanation |
| 11 | B | The schedule shows quantities demanded at different prices. |
| 12 | C | Along a normal demand curve, higher price is associated with lower quantity demanded. |
| 13 | A | The two observations show higher quantity demanded at the lower price. |
| 14 | D | The numerical combinations in a schedule can be plotted to form a demand curve. |
| 15 | B | The table shows quantity demanded increasing as price decreases. |
Topic 4 — Meaning of Supply
| Q | Answer | Explanation |
| 16 | C | Supply refers to the quantity producers are willing to offer for sale at a given price. |
| 17 | A | Supply focuses on the quantity the producer is willing to sell under the given market conditions. |
| 18 | B | Production or ownership does not automatically mean the entire amount is supplied. |
| 19 | D | Supply concerns the amount offered for sale, not merely production capacity. |
| 20 | A | Supply is related to willingness to offer goods for sale, not simply ownership. |
Topic 5 — Law of Supply
| Q | Answer | Explanation |
| 21 | B | The law of supply generally shows a direct relationship between price and quantity supplied. |
| 22 | A | A higher price generally provides an incentive to offer more for sale, other factors unchanged. |
| 23 | B | Higher prices generally encourage producers to offer greater quantities. |
| 24 | C | The law applies under the assumption that other relevant factors remain unchanged. |
| 25 | B | Quantity supplied increases as price increases. |
Topic 6 — Supply Schedule and Supply Curve
| Q | Answer | Explanation |
| 26 | A | A supply schedule records price and quantity supplied combinations. |
| 27 | C | The quantities supplied rise from 20 to 35 to 50 as price rises. |
| 28 | B | A normal supply curve slopes upward from left to right. |
| 29 | A | This represents a movement along the supply curve due to a price change. |
| 30 | B | Schedule values can be plotted as points to construct a curve. |
Topic 7 — Equilibrium Price and Quantity
| Q | Answer | Explanation |
| 31 | C | Equality of quantity demanded and quantity supplied represents equilibrium. |
| 32 | A | Equilibrium occurs where quantity demanded equals quantity supplied. |
| 33 | B | The equilibrium quantity is 800 units. |
| 34 | D | Neither excess demand nor excess supply means the market is at equilibrium. |
| 35 | B | At ₹40, both quantity demanded and quantity supplied are 500 units. |
Topic 8 — Surplus and Shortage
| Q | Answer | Explanation |
| 36 | C | Supply exceeds demand by 150 units, creating a surplus. |
| 37 | B | Quantity demanded greater than quantity supplied means shortage. |
| 38 | C | 500 − 300 = 200 units of surplus. |
| 39 | A | 900 − 600 = 300 units of shortage. |
| 40 | B | A surplus means more goods are offered than consumers want at that price. |
Topic 9 — Changes in Demand and Equilibrium
| Q | Answer | Explanation |
| 41 | A | An increase in demand with supply unchanged generally raises equilibrium price and quantity. |
| 42 | B | Greater demand tends to put upward pressure on equilibrium price and quantity. |
| 43 | A | A decrease in demand generally lowers both equilibrium price and quantity. |
| 44 | B | Reduced demand generally lowers equilibrium price and quantity. |
| 45 | C | A change caused by a factor other than the product’s own price represents a change in demand. |
Topic 10 — Changes in Supply and Equilibrium
| Q | Answer | Explanation |
| 46 | A | Increased supply generally lowers equilibrium price and raises equilibrium quantity when demand is unchanged. |
| 47 | B | Improved production conditions increase supply, generally lowering price and raising quantity. |
| 48 | A | Reduced supply generally raises equilibrium price and lowers equilibrium quantity. |
| 49 | C | An increase in supply generally puts downward pressure on price while raising quantity. |
| 50 | B | Improved production conditions allowing more output at existing prices represent an increase in supply. |
Topic 11 — Real-World Deviations
| Q | Answer | Explanation |
| 51 | A | Necessities may continue to be purchased even after substantial price increases. |
| 52 | B | An expensive non-essential item such as a designer watch is a luxury good. |
| 53 | C | The seller’s decision is based on expectations about future prices. |
| 54 | A | Perishable goods may need to be sold quickly because they can spoil. |
| 55 | B | Real-world circumstances can produce behaviour that differs from the simple textbook relationship. |
Topic 12 — Price Ceilings and Shortages
| Q | Answer | Explanation |
| 56 | A | A price ceiling is a maximum legal price. |
| 57 | C | A ceiling below equilibrium can make quantity demanded exceed quantity supplied. |
| 58 | B | 1,000 − 600 = 400 units of shortage. |
| 59 | A | Consumers may want more than producers are willing to supply at the controlled price. |
| 60 | A | A price ceiling may improve affordability but can also create shortages. |
Topic 13 — Black Markets
| Q | Answer | Explanation |
| 61 | B | Secret transactions above a legally controlled price are associated with black markets. |
| 62 | B | Shortages create unmet demand, which can encourage unofficial transactions. |
| 63 | C | Selling above the legal maximum through unofficial transactions illustrates black-market activity. |
| 64 | A | This sequence correctly explains the possible development of a black market. |
| 65 | A | Shortages leave willing buyers unable to obtain the product through the normal legal market. |
Topic 14 — Market Failure
| Q | Answer | Explanation |
| 66 | B | Pollution imposed on outsiders is a negative externality. |
| 67 | C | Benefits received by others outside the direct transaction represent a positive externality. |
| 68 | A | The seller possesses information that the buyer lacks. |
| 69 | B | Unequal information can distort decisions and produce undesirable market outcomes. |
| 70 | A | Unaccounted external costs can cause the market outcome to differ from the socially desirable outcome. |
Topic 15 — Public Goods
| Q | Answer | Explanation |
| 71 | B | Street lighting is a standard example used to explain public goods. |
| 72 | C | Difficulty in excluding people from benefiting illustrates non-excludability. |
| 73 | B | Public goods are commonly characterised as non-rival and non-excludable. |
| 74 | A | One person’s benefit does not significantly reduce another person’s ability to benefit. |
| 75 | C | Their characteristics can make provision through ordinary market transactions alone difficult. |
Tabular Answer Key
| Q | Ans | Q | Ans | Q | Ans | Q | Ans | Q | Ans |
| 1 | B | 16 | C | 31 | C | 46 | A | 61 | B |
| 2 | C | 17 | A | 32 | A | 47 | B | 62 | B |
| 3 | A | 18 | B | 33 | B | 48 | A | 63 | C |
| 4 | D | 19 | D | 34 | D | 49 | C | 64 | A |
| 5 | A | 20 | A | 35 | B | 50 | B | 65 | A |
| 6 | B | 21 | B | 36 | C | 51 | A | 66 | B |
| 7 | C | 22 | A | 37 | B | 52 | B | 67 | C |
| 8 | A | 23 | B | 38 | C | 53 | C | 68 | A |
| 9 | D | 24 | C | 39 | A | 54 | A | 69 | B |
| 10 | A | 25 | B | 40 | B | 55 | B | 70 | A |
| 11 | B | 26 | A | 41 | A | 56 | A | 71 | B |
| 12 | C | 27 | C | 42 | B | 57 | C | 72 | C |
| 13 | A | 28 | B | 43 | A | 58 | B | 73 | B |
| 14 | D | 29 | A | 44 | B | 59 | A | 74 | A |
| 15 | B | 30 | B | 45 | C | 60 | A | 75 | C |