Demand Analysis & Consumer Theory

JKSSB Finance Accounts Assistant · General Economics · 16 practice questions with answers and explanations: 3 Easy, 7 Medium, 6 Hard.

Sample questions

Sample Easy question 1

Cars and petrol are examples of:

  1. Substitute goods
  2. Free goods
  3. Veblen goods
  4. Complementary goods
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Answer: D. Complements are used together; a rise in petrol prices tends to reduce the demand for cars.

Sample Medium question 2

What is the 'law of diminishing marginal utility'?

  1. As a consumer consumes more units of a good, the additional satisfaction from each unit tends to decrease
  2. Utility always increases with consumption
  3. Utility remains constant regardless of consumption
  4. Marginal utility always equals total utility
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Answer: A. This law describes how each additional unit consumed typically provides less extra satisfaction.

Sample Hard question 3

A good whose quantity demanded rises when its price rises, because it is a staple for poor households, is called a:

  1. Giffen good
  2. Normal good
  3. Complementary good
  4. Luxury good
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Answer: A. Giffen goods are a strongly inferior staple where the income effect outweighs the substitution effect, an exception to the law of demand.

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