Instructions
For each question, choose the correct option:
A. Both Assertion (A) and Reason (R) are true, and R is the correct explanation of A.
B. Both Assertion (A) and Reason (R) are true, but R is not the correct explanation of A.
C. Assertion (A) is true, but Reason (R) is false.
D. Assertion (A) is false, but Reason (R) is true.
Topic 1: Meaning of Demand
Q1.
Assertion (A): A student’s desire to buy an expensive laptop is not necessarily demand in the economic sense.
Reason (R): Demand requires both willingness and ability to buy at a particular price.
Q2.
Assertion (A): If a person has enough money to buy a product but does not want to buy it, the product is not part of that person’s demand.
Reason (R): Demand considers only the purchasing power of a person and not the person’s willingness to buy.
Q3.
Assertion (A): A consumer’s demand for a product can change when the price of that product changes.
Reason (R): Demand refers to the quantity a consumer is willing and able to buy at a particular price.
Q4.
Assertion (A): A person’s desire for a luxury car is always considered demand.
Reason (R): A desire becomes demand only when the person is both willing and able to purchase the product.
Q5.
Assertion (A): Two people with the same desire for a smartphone may have different effective demand for it.
Reason (R): Their ability to pay for the smartphone may be different.
Topic 2: Law of Demand
Q6.
Assertion (A): Generally, a fall in the price of a good increases its quantity demanded, other things remaining unchanged.
Reason (R): A lower price makes the good relatively more attractive to consumers and can allow them to buy more.
Q7.
Assertion (A): According to the Law of Demand, consumers always buy more of every good whenever its price falls.
Reason (R): The Law of Demand describes a general inverse relationship between price and quantity demanded, other things remaining unchanged.
Q8.
Assertion (A): If the price of a product rises, its quantity demanded generally falls, assuming other relevant factors remain unchanged.
Reason (R): A price change causes a movement along the existing demand relationship rather than necessarily changing consumers’ underlying preferences.
Q9.
Assertion (A): The Law of Demand can help a shopkeeper predict the likely effect of a price reduction.
Reason (R): The Law of Demand says that price and quantity demanded generally move in opposite directions, other things remaining unchanged.
Q10.
Assertion (A): A fall in the price of a good always proves that its demand curve has shifted to the right.
Reason (R): A change in the good’s own price generally changes quantity demanded rather than shifting the demand curve.
Topic 3: Demand Schedule and Demand Curve
Q11.
Assertion (A): A demand schedule can help convert information about different prices and quantities demanded into an organised form.
Reason (R): A demand schedule records quantities demanded at different prices.
Q12.
Assertion (A): A demand curve is useful for visually studying the relationship between price and quantity demanded.
Reason (R): A demand curve represents the relationship between price and quantity demanded graphically.
Q13.
Assertion (A): If a demand schedule shows that quantity demanded falls as price rises, its corresponding demand curve will generally slope downward.
Reason (R): The demand curve is based on the price–quantity relationship shown in the demand schedule.
Q14.
Assertion (A): Every point on a demand curve represents exactly the same quantity demanded.
Reason (R): Different points on a demand curve can represent different quantities demanded at different prices.
Q15.
Assertion (A): A demand curve can help a student understand why quantity demanded changes when the price changes.
Reason (R): It provides a visual representation of the relationship between price and quantity demanded.
Topic 4: Meaning of Supply
Q16.
Assertion (A): Supply is not simply the total amount of a product stored by a producer.
Reason (R): Economic supply is related to the quantity producers are willing and able to offer for sale at a particular price.
Q17.
Assertion (A): A producer may be willing to sell a product but may not supply an unlimited quantity of it at the same price.
Reason (R): Production and selling decisions can depend on the price and the producer’s ability to provide the product.
Q18.
Assertion (A): A producer’s willingness to sell a product is relevant when analysing supply.
Reason (R): Supply involves the quantity producers are willing and able to offer for sale.
Q19.
Assertion (A): If a producer owns a large stock of goods, the entire stock automatically becomes market supply.
Reason (R): Supply concerns the quantity offered for sale rather than merely the quantity physically possessed.
Q20.
Assertion (A): Supply can be affected by the price received by producers.
Reason (R): The price received provides an important signal for producers when deciding how much to offer for sale.
Topic 5: Law of Supply
Q21.
Assertion (A): Generally, producers are willing to supply more of a good when its price rises, other things remaining unchanged.
Reason (R): A higher price can make supplying additional units more attractive to producers.
Q22.
Assertion (A): The Law of Supply means producers must increase supply whenever price rises.
Reason (R): The law describes a general relationship between price and quantity supplied under other unchanged conditions.
Q23.
Assertion (A): A higher market price can encourage producers to offer more output for sale.
Reason (R): Producers may respond to the greater return associated with a higher price.
Q24.
Assertion (A): A fall in price necessarily causes the supply curve itself to shift left.
Reason (R): A change in the good’s own price generally causes a change in quantity supplied rather than a shift of the supply curve.
Q25.
Assertion (A): The Law of Supply is useful for analysing how producers may respond to price changes.
Reason (R): It describes a general positive relationship between price and quantity supplied, other things remaining unchanged.
Topic 6: Supply Schedule and Supply Curve
Q26.
Assertion (A): A supply schedule can show how much producers are willing to sell at different prices.
Reason (R): It lists quantities supplied corresponding to different prices.
Q27.
Assertion (A): A supply curve is generally upward sloping when the Law of Supply holds.
Reason (R): Higher prices are generally associated with higher quantities supplied, other things remaining unchanged.
Q28.
Assertion (A): Different points on a supply curve may show different quantities supplied.
Reason (R): Each point can represent a quantity supplied corresponding to a particular price.
Q29.
Assertion (A): A supply schedule and a supply curve can convey related economic information in different forms.
Reason (R): A schedule presents information in a table-like form, while a curve presents the relationship graphically.
Q30.
Assertion (A): A supply curve can help producers and students visualise the relationship between price and quantity supplied.
Reason (R): The curve shows how quantity supplied is related to price.
Topic 7: Equilibrium Price and Equilibrium Quantity
Q31.
Assertion (A): Market equilibrium occurs where quantity demanded equals quantity supplied.
Reason (R): At that point, the amount buyers want to purchase equals the amount sellers want to sell.
Q32.
Assertion (A): If quantity demanded is greater than quantity supplied at a given price, that price represents equilibrium.
Reason (R): Equilibrium requires equality between quantity demanded and quantity supplied.
Q33.
Assertion (A): Equilibrium price is determined by the interaction of demand and supply.
Reason (R): Both buyers’ willingness to purchase and sellers’ willingness to supply influence the market outcome.
Q34.
Assertion (A): At equilibrium, a market must have a shortage.
Reason (R): A shortage occurs when quantity demanded exceeds quantity supplied.
Q35.
Assertion (A): If demand increases while supply remains unchanged, the equilibrium outcome can change.
Reason (R): A change in demand alters the point at which demand and supply are equal.
Topic 8: Surplus and Shortage
Q36.
Assertion (A): A shortage occurs when buyers want to purchase more than sellers are willing to provide at a particular price.
Reason (R): Quantity demanded exceeds quantity supplied during a shortage.
Q37.
Assertion (A): A surplus can occur when sellers offer more than buyers want to purchase at the prevailing price.
Reason (R): A surplus means quantity supplied exceeds quantity demanded.
Q38.
Assertion (A): A shortage does not mean that consumers have no desire for the product.
Reason (R): A shortage means quantity demanded is greater than quantity supplied at the particular price.
Q39.
Assertion (A): If a market has a surplus, every consumer who wants the product must be unable to obtain it.
Reason (R): A surplus means sellers have offered more than buyers want to purchase at the prevailing price.
Q40.
Assertion (A): Surplus and shortage are useful concepts for understanding whether the prevailing price is consistent with market demand and supply.
Reason (R): They compare the quantities buyers want with the quantities sellers offer.
Topic 9: Changes in Demand and Their Effect on Equilibrium
Q41.
Assertion (A): An increase in demand, with supply unchanged, can raise the equilibrium price.
Reason (R): At the old price, buyers may want more than sellers are offering, creating upward pressure on price.
Q42.
Assertion (A): A fall in demand necessarily causes the supply curve to shift left.
Reason (R): A change in demand changes the demand side of the market rather than automatically changing supply conditions.
Q43.
Assertion (A): If more consumers want a product at the existing prices, the equilibrium outcome may change.
Reason (R): An increase in demand can create a situation where quantity demanded exceeds quantity supplied at the old equilibrium price.
Q44.
Assertion (A): An increase in demand always lowers equilibrium price.
Reason (R): When demand increases and supply is unchanged, the new equilibrium generally involves a higher price.
Q45.
Assertion (A): Changes in demand can affect both equilibrium price and equilibrium quantity.
Reason (R): Equilibrium depends on the interaction of demand and supply.
Topic 10: Changes in Supply and Their Effect on Equilibrium
Q46.
Assertion (A): An increase in supply, with demand unchanged, can lower equilibrium price.
Reason (R): Greater supply can create downward pressure on price if demand does not increase correspondingly.
Q47.
Assertion (A): A reduction in supply can create a shortage at the old equilibrium price.
Reason (R): With less supply available, quantity supplied at the old price may become lower than quantity demanded.
Q48.
Assertion (A): An increase in supply necessarily means that consumers’ demand curve has shifted.
Reason (R): A change in supply concerns sellers’ conditions rather than automatically changing consumers’ demand.
Q49.
Assertion (A): A fall in supply can affect the equilibrium quantity traded in a market.
Reason (R): Equilibrium quantity is determined through the interaction of demand and supply.
Q50.
Assertion (A): If supply increases while demand remains unchanged, equilibrium quantity can increase.
Reason (R): More units can be supplied and traded when the market moves to a new equilibrium.
Topic 11: Real-World Deviations — Necessities, Luxury Goods, Perishables and Expectations
Q51.
Assertion (A): The response of consumers to price changes may be different for necessities and luxury goods.
Reason (R): Consumers may find it harder to reduce consumption of an essential item than to reduce consumption of a luxury item.
Q52.
Assertion (A): A household may continue buying a necessary medicine even after its price rises.
Reason (R): The medicine may be considered essential for the household.
Q53.
Assertion (A): Consumers’ expectations about future prices can influence their current buying decisions.
Reason (R): People may change current purchases when they expect prices to change in the future.
Q54.
Assertion (A): Perishable goods can never experience changes in supply or price.
Reason (R): Perishable goods have limited storage life and therefore sellers may have to respond quickly to market conditions.
Q55.
Assertion (A): A consumer expecting a large price increase in a product may decide to buy more of it today.
Reason (R): Expectations about future prices can influence present demand.
Topic 12: Price Ceilings and Shortages
Q56.
Assertion (A): A price ceiling set below the market equilibrium price can create a shortage.
Reason (R): At the controlled lower price, quantity demanded may exceed quantity supplied.
Q57.
Assertion (A): A price ceiling always increases the quantity supplied in a market.
Reason (R): A lower controlled price can reduce the incentive of some sellers to supply the product.
Q58.
Assertion (A): Government intervention through a price ceiling can affect how a market allocates a product.
Reason (R): When the controlled price is below equilibrium, the quantity demanded and supplied may no longer be equal.
Q59.
Assertion (A): A price ceiling above the equilibrium price necessarily creates a shortage.
Reason (R): A ceiling above the equilibrium price does not prevent the market from operating at its equilibrium price.
Q60.
Assertion (A): A price ceiling below equilibrium can create a gap between the quantity consumers want and the quantity producers offer.
Reason (R): The controlled price can make quantity demanded greater than quantity supplied.
Topic 13: Black Markets
Q61.
Assertion (A): A shortage created by a binding price ceiling can provide conditions in which black-market transactions may emerge.
Reason (R): Some buyers may be willing to pay more than the legal controlled price when the product is scarce.
Q62.
Assertion (A): Black markets can develop when legal market arrangements do not satisfy some buyers’ demand.
Reason (R): A shortage can create incentives for transactions outside the regulated market.
Q63.
Assertion (A): Every shortage automatically creates a black market.
Reason (R): Black-market activity can arise when scarcity, restrictions and incentives make unofficial transactions possible.
Q64.
Assertion (A): A black market is simply the normal legal market operating at a higher price.
Reason (R): Black-market transactions occur outside the legally permitted market arrangements.
Q65.
Assertion (A): If a controlled price creates a shortage, some consumers may search for alternative ways to obtain the scarce product.
Reason (R): Scarcity can increase the incentive to find a product through channels outside the regulated market.
Topic 14: Market Failures — Externalities and Information Asymmetry
Q66.
Assertion (A): A market outcome may fail to reflect some costs imposed on people who are not directly involved in a transaction.
Reason (R): An externality occurs when an economic activity affects third parties who are not directly part of the transaction.
Q67.
Assertion (A): Pollution from a factory can be an example of a negative externality.
Reason (R): Pollution can impose costs on nearby people even though they are not buyers or sellers in the factory’s transactions.
Q68.
Assertion (A): Information asymmetry means that all participants in a market have exactly the same information.
Reason (R): Information asymmetry exists when one side of a transaction has more or better information than the other side.
Q69.
Assertion (A): Information asymmetry can make it difficult for a buyer to judge the quality of a product.
Reason (R): The seller may possess information about product quality that the buyer does not have.
Q70.
Assertion (A): A market with information asymmetry must always produce an efficient outcome.
Reason (R): Unequal information can interfere with well-informed decisions by market participants.
Topic 15: Public Goods
Q71.
Assertion (A): Public goods can be difficult for private markets to provide in adequate amounts.
Reason (R): Public goods are generally characterised by non-excludability and non-rivalry.
Q72.
Assertion (A): Street lighting can have characteristics of a public good.
Reason (R): One person’s benefit from street lighting does not normally prevent others in the area from benefiting from the same lighting.
Q73.
Assertion (A): A public good is necessarily a good that only the government can produce.
Reason (R): The key economic characteristics of public goods are non-excludability and non-rivalry, not simply government ownership.
Q74.
Assertion (A): If one person’s use of a good substantially reduces the amount available for others, the good is non-rival.
Reason (R): Non-rival goods can be used by one person without reducing the ability of others to benefit from them.
Q75.
Assertion (A): Public goods may be under-provided by private markets.
Reason (R): Their non-excludable nature can make it difficult for private providers to charge every beneficiary.
DETAILED ANSWER KEY
Topic 1: Meaning of Demand
Q1 — A
Both statements are true, and the Reason directly explains the Assertion. Mere desire is not sufficient; effective demand requires willingness and ability to purchase.
Q2 — C
The Assertion is true because willingness is also necessary. The Reason is false because demand depends on both willingness and ability, not purchasing power alone.
Q3 — A
Both are true, and the Reason explains why the quantity demanded is considered at a particular price.
Q4 — D
The Assertion is false because desire alone is not always demand. The Reason is true because willingness and ability to buy are required.
Q5 — B
Both are true, but the Reason gives a specific factor—ability to pay—rather than fully explaining all possible differences in effective demand.
Topic 2: Law of Demand
Q6 — A
Both are true, and the Reason explains why a lower price generally encourages a higher quantity demanded.
Q7 — D
The Assertion is false because “always” is too absolute. The Reason correctly describes the Law of Demand as a general inverse relationship under other unchanged conditions.
Q8 — A
Both are true. A change in own price generally causes a movement along the demand relationship, while preferences and other determinants are assumed unchanged.
Q9 — A
Both are true, and the Reason directly explains why a price reduction may increase quantity demanded.
Q10 — D
The Assertion is false. A fall in own price normally changes quantity demanded rather than shifting the entire demand curve. The Reason is true.
Topic 3: Demand Schedule and Demand Curve
Q11 — A
A demand schedule records quantities demanded at different prices, so it directly provides the organised information described.
Q12 — A
Both statements are true, and the Reason directly explains the usefulness of the demand curve.
Q13 — A
The downward relationship in the schedule is represented graphically by a generally downward-sloping demand curve.
Q14 — D
The Assertion is false because different points represent different price–quantity combinations. The Reason is true.
Q15 — A
The curve visually represents the relationship between price and quantity demanded, making the relationship easier to interpret.
Topic 4: Meaning of Supply
Q16 — A
Supply is about the quantity producers are willing and able to offer for sale, not simply their physical stock.
Q17 — B
Both are true. However, the Reason gives the broader decision-making conditions rather than being a complete explanation of every reason why supply may be limited.
Q18 — A
Willingness to sell is an essential part of the economic concept of supply.
Q19 — D
The Assertion is false because possessing stock does not mean the entire stock is being offered for sale. The Reason is true.
Q20 — A
Price provides an important incentive and signal to producers and therefore can influence supply decisions.
Topic 5: Law of Supply
Q21 — A
A higher price can make additional production and sale more attractive, giving the positive relationship described by the Law of Supply.
Q22 — D
The Assertion is false because the law expresses a general relationship, not an absolute rule applying in every possible situation. The Reason is true.
Q23 — A
Both statements are true, and the higher return can explain why producers may offer more.
Q24 — D
The Assertion is false. A change in own price generally changes quantity supplied along the supply curve. The Reason is true.
Q25 — A
The Law of Supply directly helps analyse producers’ responses to price changes.
Topic 6: Supply Schedule and Supply Curve
Q26 — A
A supply schedule records quantities supplied at different prices, exactly as described.
Q27 — A
The upward slope represents the general positive relationship between price and quantity supplied.
Q28 — A
Different points correspond to different price and quantity-supplied combinations.
Q29 — A
Both are true, and the Reason directly explains how the two forms communicate related information.
Q30 — A
The supply curve gives a visual representation of the price–quantity supplied relationship.
Topic 7: Equilibrium Price and Equilibrium Quantity
Q31 — A
Equilibrium occurs when quantity demanded equals quantity supplied; the Reason states precisely why.
Q32 — D
The Assertion is false because excess demand represents a shortage, not equilibrium. The Reason correctly states the condition for equilibrium.
Q33 — A
Both sides of the market interact to determine the equilibrium outcome.
Q34 — D
The Assertion is false because equilibrium means equality, not shortage. The Reason correctly defines shortage.
Q35 — A
A change in demand changes the relationship between demand and supply and therefore can change the equilibrium outcome.
Topic 8: Surplus and Shortage
Q36 — A
A shortage is precisely the situation where quantity demanded exceeds quantity supplied.
Q37 — A
A surplus occurs when quantity supplied exceeds quantity demanded.
Q38 — A
The Assertion is true because shortage concerns the comparison of desired purchases with available supply, not the absence of desire. The Reason correctly defines shortage.
Q39 — D
The Assertion is false. A surplus does not mean consumers cannot obtain the product; rather, sellers have more than buyers want at that price. The Reason is true.
Q40 — A
Surplus and shortage compare the two sides of the market and therefore help analyse the market situation.
Topic 9: Changes in Demand and Their Effect on Equilibrium
Q41 — A
An increase in demand can create excess demand at the old price, putting upward pressure on price.
Q42 — D
The Assertion is false because a fall in demand does not automatically shift the supply curve. The Reason is true.
Q43 — A
More consumers wanting the product can increase demand and create excess demand at the previous equilibrium price.
Q44 — D
The Assertion is false because increased demand generally puts upward rather than downward pressure on equilibrium price when supply is unchanged. The Reason is true.
Q45 — B
Both are true, but the Reason states the general basis of equilibrium rather than specifically explaining why a demand change can affect both price and quantity.
Topic 10: Changes in Supply and Their Effect on Equilibrium
Q46 — A
Greater supply can create downward pressure on price when demand remains unchanged.
Q47 — A
Reduced supply can make quantity supplied lower than quantity demanded at the old price, creating a shortage.
Q48 — D
The Assertion is false. An increase in supply does not mean that demand has shifted. The Reason is true.
Q49 — B
Both statements are true, but the Reason is a general statement about equilibrium rather than a direct explanation of the specific effect of falling supply.
Q50 — A
With greater supply and unchanged demand, the market can move to an equilibrium involving a larger quantity traded.
Topic 11: Real-World Deviations
Q51 — A
Necessities are often harder to reduce in consumption than luxury goods, so consumers may respond differently to price changes.
Q52 — A
Both statements are true, and the essential nature of medicine explains why a household may continue purchasing it.
Q53 — A
Expectations about future prices can directly affect present purchasing decisions.
Q54 — D
The Assertion is false. Perishable goods can experience changes in supply and price. The Reason is true because limited storage life makes quick responses important.
Q55 — A
Expectation of a future price increase can encourage consumers to purchase earlier, increasing current demand.
Topic 12: Price Ceilings and Shortages
Q56 — A
A binding price ceiling below equilibrium can make quantity demanded greater than quantity supplied, creating a shortage.
Q57 — D
The Assertion is false because a lower controlled price does not necessarily increase supply. The Reason correctly explains why supply may decrease.
Q58 — A
A binding price ceiling changes the price at which transactions are permitted and can therefore create a gap between demand and supply.
Q59 — D
The Assertion is false. A ceiling above equilibrium is not binding and therefore does not necessarily create a shortage. The Reason is true.
Q60 — A
A binding ceiling can create exactly the stated gap: consumers want more than sellers offer at the controlled price.
Topic 13: Black Markets
Q61 — A
A shortage combined with a legally restricted price can create incentives for unofficial transactions at higher prices.
Q62 — A
When legal supply does not satisfy demand, some participants may have an incentive to use unofficial channels.
Q63 — D
The Assertion is false because a shortage does not automatically guarantee a black market. The Reason correctly identifies conditions that can encourage one.
Q64 — D
The Assertion is false because a black market involves transactions outside legally permitted market arrangements. The Reason is true.
Q65 — A
Scarcity can encourage consumers to seek alternative channels when normal regulated channels cannot meet their demand.
Topic 14: Market Failures
Q66 — A
An externality occurs when an economic activity affects third parties outside the direct transaction.
Q67 — A
Pollution can impose costs on people who are neither buyers nor sellers in the factory’s transactions.
Q68 — D
The Assertion is false. Information asymmetry means information is unevenly distributed, not equally available. The Reason is true.
Q69 — A
A seller’s superior information about product quality can make it difficult for a buyer to judge that quality accurately.
Q70 — D
The Assertion is false because information asymmetry can prevent well-informed decisions. The Reason is true.
Topic 15: Public Goods
Q71 — A
The characteristics of non-excludability and non-rivalry can make it difficult for private providers to charge all beneficiaries, contributing to under-provision.
Q72 — A
Street lighting can benefit multiple people simultaneously without one person’s use normally reducing another person’s benefit.
Q73 — D
The Assertion is false. Public goods are defined by their economic characteristics, not simply by government ownership. The Reason is true.
Q74 — D
The Assertion is false because if one person’s use reduces availability for others, the good is rival, not non-rival. The Reason correctly defines non-rivalry.
Q75 — A
Non-excludability can make charging individual users difficult, which can contribute to under-provision by private markets.
TABULAR ANSWER KEY
| Q. | Ans. | Q. | Ans. | Q. | Ans. | Q. | Ans. | Q. | Ans. |
| 1 | A | 16 | A | 31 | A | 46 | A | 61 | A |
| 2 | C | 17 | B | 32 | D | 47 | A | 62 | A |
| 3 | A | 18 | A | 33 | A | 48 | D | 63 | D |
| 4 | D | 19 | D | 34 | D | 49 | B | 64 | D |
| 5 | B | 20 | A | 35 | A | 50 | A | 65 | A |
| 6 | A | 21 | A | 36 | A | 51 | A | 66 | A |
| 7 | D | 22 | D | 37 | A | 52 | A | 67 | A |
| 8 | A | 23 | A | 38 | A | 53 | A | 68 | D |
| 9 | A | 24 | D | 39 | D | 54 | D | 69 | A |
| 10 | D | 25 | A | 40 | A | 55 | A | 70 | D |
| 11 | A | 26 | A | 41 | A | 56 | A | 71 | A |
| 12 | A | 27 | A | 42 | D | 57 | D | 72 | A |
| 13 | A | 28 | A | 43 | A | 58 | A | 73 | D |
| 14 | D | 29 | A | 44 | D | 59 | D | 74 | D |
| 15 | A | 30 | A | 45 | B | 60 | A | 75 | A |