# NCERT Solutions for Class 12 Micro Economics Chapter – 3 Demand

Here you will find NCERT Solution Questions for Class 12 Economics with Answers PDF Free Download based on the important concepts and topics given in the textbook as per CBSE new exam pattern. This may assist you to understand and check your knowledge about the chapters. These Solution Questions Answers are selected supported by the newest exam pattern as announced by CBSE.

## NCERT TEXTBOOK QUESTIONS SOLVED

Q1. Suppose there are two consumers in the market for a good and their demand functions are as follows: ({ D }{ 1 }( p) =20-P) for any price than less 20, and ({ D }{ 1 }(p)=0) at any price greater than or equal to 20. ({ D }{ 2 }(p)=30-2P) for any price less than 15 and ({ D }{ 2 }(p)=0) at any price greater than or equal to 15. Find out the market demand function.

Answer: It can be seen from the given demand functions that Consumer 1 do not want to demand the goods for any price greater than or equal Rs.20 and consumer 2 do not want to demand the goods for any price greater than Rs 15.
Hence, the market demand function will be,

Q2. Suppose there are 20 consumers for a good and they have identical demand function?

Q3.

Q4. What do you mean by a normal good?(or)
when good is called ‘normal goods’?

Answer: for normal good, with a raise in income,the demand of the commodity also rises and vice versa. Shortely direct relationship exists the income of a coustomer and demand of normal good.For example, a new car, new clothings.

Q5. What do you mean by an ‘inferior good’? Give some examples. [CBSE 2006]
Or
Give the meaning of inferior good and explain the same with the help of an example.[NCERT, AI 2014] [3-4 Marks]

Answer: i)A good is called ‘inferior goods’ when its demand falls with a rise in the income of a consumer and vice- versa.

ii)For example, Jowar or Bajra for a poor person.

iii)A good is inferior in a relative terms. It means, a good is inferior or normal is determined by the income level of a consumer.

iv)When a consumer moves to higher income, he/she may consider some goods below their income status, and treats them as inferior.

Q6. What do you mean by substitutes? Give examples of two goods which are substitutes of each other. [3-4 Marks]

Answer: i)Substitute goods are those goods which can be used in place of another goods and give the same satisfaction to a consumer.

ii)There would always exist a direct relationship between the price of substitute goods and demand for given commodity.

iii)It means with an increase in price of substitute goods, the demand for given commodity also rises and vice-versa.

iv)For example, Pepsi and Coke, tea and coffee are substitute to each other.

## MORE QUESTIONS SOLVED

Very Short Answer Type Questions (1 Mark)

Q1. What is meant by demand? [CBSE 2005C, AI 07]

Answer: Demand is a quantity of a commodity that a consumer wishes to purchase at a given level of price and during a specified period of time.

Q2. Define market demand. [CBSE 2008, 12, 13]

Answer: Market demand refers to the quantity of a commodity that all the consumers are willing and able to buy, at a particular price during a given period of time.

Q3. Due to rise in price of commodity x the demand of commodity y falls. What type of commodity are they?

Q4. Due to rise in price of the commodity x, the demand of commodity y also rises. What type of commodity they are?

Q5. How will an increase in the price of petrol affect the demand curve of a car?

Answer: The demand curve of a car will shift to the left.

Q6. A fall in the income of the consumer leads to a rise in the demand for a good. What is good X called?

Q7. What is meant by the law of demand?

Answer: It states that price of the commodity and quantity demanded are inversely related to each other when other factors remain constant (ceteris Paribus).

Q8. When the demand for a good rises due to a fall in its own price, what is the change in demand called?

Q9. Define ‘change in demand’.[CBSE Sample Paper 2008]

Answer: If demand changes due to the change in factors other than price, it is known as change in demand.

Q10. What causes an upward movement along a demand curve of a commodity?
[CBSE Sample Paper 2010]

Answer: Rise in price of goods and fall in quantity demanded i.e., Contraction in demand.

Q11. Give one reason for a shift in demand curve. [AT 2012]

Answer: Change in price of substitute goods.

Q12. What determines the quantity of a good that the buyers demand for?

Answer: The quantity of a good that the buyers demand for is determined by the price of the goods, income, the prices of related goods, tastes, expectations, and the number of buyers.

Q13. Why market demand curve is flatter?

Answer: Market demand curve is flatter than the individual demand curves because as price falls, proportionate rise in market demand is more than proportionate rise in individual

## Multiple Choice Questions (1 Mark)

Q1. Demand for a commodity refers to:

(a) desire for the commodity.
(b) need for the commodity.
(c) quantity demanded of that commodity.
(d) quantity of the commodity demanded at a certain price during any particular period of time.

Q2. Contraction of demand is the result of:

(a) decrease in the number of consumers.
(b) increase in the price of goods concerned.
(c) increase in the prices of other goods.
(d) decrease in the income of purchasers.

Q3. All but one of the following are assumed to remain the same while drawing an individual’s demand curve for a commodity. Which one is it?

(a) The preference of the individual.
(b) His monetary income.
(c) Price.
(d) Price of related goods.

Q4. Which of the following pairs of goods is an example of substitutes?

(a) Tea and sugar.
(b) Tea and coffee.
(c) Pen and ink.
(d) Shirt and trousers.

Q5. The Law of Demand, assuming other things to remain constant, establishes the relationship between:

(a) income of the consumer and the quantity of goods demanded by him.
(b) price of goods and the quantity demanded.
(c) price of goods and the demand for its substitute.
(d) quantity demanded of goods and the relative prices of its complementary goods.

## Short Answer Type Questions (3-4 Marks)

Q1. Does a rise in price of other goods have the same effect on demand for a commodity?

Answer: No, rise in prices of other goods does not have the same effect on demand for a commodity.

i)In case of rise in price of substitute goods, demand for the given commodity rises.

ii)In case of rise in price of complementary goods, demand for the given commodity falls.

Q2. Does a fall in income have the same effect on demand for the given commodity?

Answer: No, fall in income does not have the same effect on demand for the given commodity.

i)If the given commodity is a normal good, the fall in income will reduce the demand for the normal goods.

i)If the given commodity is an inferior good, the fall in income will raise the demand for the inferior goods.

iii)If the given commodity is a necessity, the fall in income will not change the demand for the necessity of goods.

Q3. What is the relation between good x and good y in each case, if with a fall in price of x demand for good y (1) rises and (2) falls? Give reason.[CBSE 2008}

Answer:i)Goods x and y are complementary goods as with fall in price of x, demand for good y rises.

ii)Goods x and y are substitute goods as with the fall in price of x, demand for good y also falls.

Q4. Giving reasons, state if the following statements are true or false:

i)An increase in the price of Coke would result in decrease in the demand for Pepsi.

ii)An increase in the price of sugar would result in an increase in the demand for tea.

iii)An increase in the income of a consumer would result in an increase in demand for all types of goods that are demanded by a consumer.

Answer:i)False: Coke and Pepsi are substitute goods. An increase in the price of Coke would induce consumers to substitute Coke by Pepsi. Demand for Pepsi will increase.

ii)False: Sugar and tea are complementary goods. An increase in prite of sugar would make tea costlier. Hence, the demand for tea would decrease.

iii)False: With the increase in income, the consumer’s demand for normal goods will increase. Demand for inferior goods may, in fact, fall.

Q5. Differentiate between Normal Goods and Inferior Goods. [AI 2012, CBSE 2013]

Q6. Explain the inverse relationship between the price of a commodity and its demand. [AI 2010, CBSE Sample Paper 2010, CBSE 2000, AI 2000]

Answer: The inverse relationship between price of the commodity and quantity demanded for that commodity is because of the following reasons:

i)Income effect: (a) Quantity demanded of a commodity changes due to change in purchasing power (real income), caused by change in price of a commodity is called Income Effect,
(b) Any change in the price of a commodity affects the purchasing power or real income of the consumers although his money income remains the same.
(c) When price of a commodity rise more has to be spent on purchase of the same quantity of that commodity. Thus, rise in price of commodity leads to fall in real income, which will thereby reduce quantity demanded is known as Income effect.

ii)Substitution effect: (a) It refers to substitution of one commodity in place of another commodity when it becomes relatively cheaper.
(b) A rise in price of the commodity let coke, also means that price of its substitute, let pepsi, has fallen in relation to that of coke, even though the price of pepsi remains unchanged. So, people will buy more of pepsi and less of coke when price of coke rises.
(c) In other words, consumers will substitute pepsi for coke. This is called Substitution effect.
Price effect = Income effect + Substitution effect

iii)Law of Diminishing Marginal Utility: (a) This law states that when a consumer consumes more and more units of a commodity, every additional unit of a commodity gives lesser and lesser satisfaction and marginal utility decreases.
(b) The consumer consumes a commodity till marginal utility (benefit) he gets equals to the price (cost) they pay, i.e., where benefit = cost.
(c) For example, a thirsty man gets the maximum satisfaction (utility) from the first glass of water. Lesser utility from the 2nd glass of water, still lesser from the 3rd glass of water and so on. Clearly, if a consumer wants to buy more units of the commodity, he would like to do so at a lower price. Since, the utility derived from additional unit is lower.

iv)Additional consumer:(a) When price of a commodity falls, two effects are quite possible:
• New consumers, that is, consumers that were not able to afford a commodity previously, starts demanding it at a lower price.
• Old consumers of the commodity starts demanding more of the same commodity by spending the same amount of money.
(b) As the result of old and new buyers push up the demand for a commodity when price falls.

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