CBSE Class 12 Economics Demand Worksheet

CBSE Class 12 Economics Worksheet - Demand. CBSE issues sample papers every year for students for class 12 board exams. Students should solve the CBSE issued sample papers to understand the pattern of the question paper which will come in class 12 board exams this year. The sample papers have been provided with marking scheme. It’s always recommended to practice as many CBSE sample papers as possible before the board examinations. Sample papers should be always practiced in examination condition at home or school and the student should show the answers to teachers for checking or compare with the answers provided. Students can download the sample papers in pdf format free and score better marks in examinations. Refer to other links too for latest sample papers.

Important Points for Demand Class 12 Economics

Demand Revision Notes

Deficient Demand : When AD falls short of AS at full employment, it is called deficient demand. Deficient Demand = AD < AS (at full employment level).

Reasons for Deficient Demand :
(i) Reduction in supply of currency,
(ii) Increase in Bank Rate,
(iii) Increase in Taxes,
(iv) Reduction in Public Expenditure,
(v) Increase in Propensity to Save,
(vi) Decline in Export Demand.

Effects of Deficient Demand :
(i) Fall in production level,
(ii) Fall in price level
(iii) Increase in unemployment.

Excess Demand : Excess demand refers to a situation when aggregate demand exceeds aggregate supply corresponding to full employment. AD > AS (at full employment level)

Reasons for Excess Demand :
(i) Increase in public expenditure,
(ii) Reduction in taxes,
(iii) Deficit financing,
(iv) Extension of credit facilities,
(v) Increase in investment demand,
(vi) Increase in propensity to consume
(vii) Increase in export demand.

Effects of Excess Demand :
(i) Decrease in unemployment,
(ii) Increase in production level, and
(iii) Increase in price level.

Cyclical Fluctuations : In real life, Aggregate demand does not match Aggregate Supply. Consequently economy faces economic fluctuations like : Depression → Recovery → Full employment → Propensity → Recession → Again depression and process goes on.

There are four important ways to correct excess and deficient demand :
(i) Fiscal Policy,
(ii) Monetary Policy,
(iii) Foreign Trade Policy,
(iv) Other Measures.

Fiscal Policy : Government measures related to public expenditure, taxation and public debt are referred as fiscal measures and the policy related to these measures is called Fiscal Policy.

Instruments of Fiscal Policy : Public expenditure, taxation, public debt and deficit financing.

Monetary Policy : A policy, which controls the money supply, credit availability and its cost is termed as monetary policy. Central Bank of the country frames this policy and ensures its execution.

Measures of Monetary Policy :
(i) Quantitative : Bank Rate, Open Market Operations, Minimum Reserve Ratio and Liquidity Ratio.
(ii) Qualitative : Margin requirement of loans, Rationing of credit, Direct action and Moral pressure.

 TOPIC - Demand

I Terms: Define

(1) Demand

(2) Effective Demand

(3) Demand Curve

(4) Demand schedule

(5) Law of Demand

(6) Demand function

(7) Determinants of demand

(8) individual or household demand

(9) Market demand

(10) Substitute goods (with e.g.)

(11) Complementary goods (with e.g.)

(12) Cross price effects (with e.g.)

(13) Inferior goods

(14) Normal goods

(15) Shift of demand curve

(16) Movement along a demand curve

(17) Increase in demand

(18) Decrease in demand

(19) Extension of demand

(20) Contraction of demand

II Differentiate between:-

(1) Normal / Inferior good

(2) substitutes / Complements

(3) movement along / shift of demand curve

(4) Increase / expansion in demand 

(5) increase / decrease in demand

(6) individual / market demand

(7) Demand schedule / demand curve

III Long answer questions:-

1. Explain the Law of Demand.

2. Explain the determinants of Demand. (hint: w.r.t. individual demand, market demand and both)

3. Why does demand curve slope downwards? (OR Why does a household demand more at lower price?)

4. Why does a household demand more (or less) at the same price?

5. How are the following determined: (Use graphic of numerical eg)

(i) Market demand curve for a good x

(ii) Market demand schedule for a good x.

6. What are the assumptions of Law of Demand.

IV Applicative Questions:

1. Discuss the effect of following changes on demand for CNG. (Use diagram wherever possible)

(i) Price of CNG rises.

(ii) Price of diesel (& petrol) rises

(iii) RTV vans become more expensive.

(iv) Advertisements by a famous filmstar /cricketer to promote preservation and conservation of environment.

(v) Consumer’s income falls.

Demand MCQs with Answers

Question. Which of the following can be regarded as law of Demand?
(a) Ceteris Paribus, if Price of a product rises, its quantity demanded will fall
(b) Higher the Income, greater is the expenditure
(c) Taxes have no relation with the benefits which a person derives from the State
(d) None of the above
Answer: A

Question. In a Demand Curve, the Vertical Axis will be —
(a) Quantity Demanded
(b) Price of the Product
(c) Income Levels of Consumer
(d) Any of the above
Answer: B

Question. The segregation between Income Effect and Substitution Effect is adequately explained by —
(a) Cardinal Approach
(b) Ordinal Approach
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. Which of the factors does not cause Increase in Demand?
(a) Rise in the price of Substitute Goods
(b) Fall in price of this product
(c) Increase in population
(d) Increase in Income Levels of Buyers
Answer: B

Question. Which of the following statement best describes the Substitution Effect?
(a) When the price of a product rises, Consumers stop consuming the product.
(b) When the price of a product rises, Consumers tend to substitute it with a relatively expensive product
(c) When the price of a product rises, Consumers tend to substitute it with a relatively inexpensive product
(d) When the price of a product fails, consumers tend to substitute in with a more expensive product
Answer: C

Question. Which of these is a variable factor in the Law of Demand?
(a) Consumers' Income Level
(b) Economic Conditions of Boom / Recession
(c) Quality of the Product
(d) Price of the Product
Answer: D

Question. When the price of a Commodity falls, the Consumer
(a) Can buy the same quantity of the commodity with lesser money
(b) Can buy more of the same commodity with the same money
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Which of the following results in a shifting of the Demand Curve?
(a) Increase in the tax on cigarettes leading to their fall in demand
(b) Slashing of ad rates by a television channel resulting in a rise in the number of ads
(c) Rise in the electricity harges leading to lesser consumption
(d) All of these
Answer: D

Question. A movement along the Demand Curve for soft drinks is best described as —
(a) Increase in Demand
(b) Decrease in Demand
(c) All of the above
Answer: C

Question. Conspicuous Goods —
(a) Are an exception the Law of Demand
(b) Follow the Law of Demand
(c) Either (a) or (b)
(d) Neither (a) nor (b)
Answer: A

Question. Increase in Demand leads to —
(a) Inward shift of the Demand Curve
(b) Outward shift of the Demand Curve
(c) Upward movement on the same Curve
(d) Downward movement on the same Curve
Answer: B

Question. In case of Contraction of Demand, there is a —
(a) Inward shift of the Demand Curve
(b) Outward shift of the Demand Curve
(c) Upward movement on the same Curve
(d) Downward movement on the same Curve
Answer: C

Question. When the price of a product falls, its Demand increases because —
(a) New Consumers start buying the product
(b) Existing Consumers buy more quantities of the product
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. The condition "other things being equal" in the Law of Demand denotes —
(a) Price of related goods remaining constant
(b) Income Levels remaining constant
(c) Tastes and Preferences remaining constant
(d) All of the above
Answer: D

Question. In the case of a Giffen Good, the Demand Curve will be
(a) Horizontal
(b) Downward—sloping to the right
(c) Backward falling to the left
(d) Upward—sloping to the right
Answer: C

Question. Change in demand due to change in price is known as
(a) Change in demand
(b) Change in quantity demanded
(c) Income demand
Answer: B

Question. A Decrease in Demand can result from —
(a) Increase in Market Price
(b) Decrease in Income
(c) Increase in the Price of Substitutes
(d) Decrease in the Price of Complements
Answer: B

Question. In case of Giffen Goods, Demand Curve will slope —
(a) Upward
(b) Downward
(c) Horizontal
(d) Vertical
Answer: A

Question. An Inferior Commodity is one which is consumed in smaller quantities when the income of consumer —
(a) Becomes nil
(b) Remains the same
(c) Falls
(d) Rises
Answer: D 

Question. Decrease in Demand is caused by —
(a) Change in Buyer Preferences and Tastes against this commodity
(b) Re—distribution of income away from Consumers who favour this commodity
(c) Decrease in population
(d) All the above
Answer: D

Question. The Law of Demand, assuming other things to remain constant, establishes the relationship between —
(a) Income of the Consumer and the quantity of a good demanded by him
(b) Price of a good and the quantity demanded
(c) Price of a good and the demand for its Substitute
(d) Quantity demanded of a good and the relative prices of its complementary goods
Answer: B

Question. Giffen Goods are goods which —
(a) Are considered inferior by Consumers
(b) Occupy a substantial place in the Consumer's budget
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Rise in the price of Substitute Goods leads to
(a) Increase in Demand
(b) Decrease in Demand
(c) Expansion of Demand
(d) Contraction of Demand
Answer: A

Question. If regardless of changes in its price, the quantity demanded of a product is unchanged, then, Demand Curve for that product will be —
(a) Horizontal
(b) Vertical
(c) Positively Sloped
(d) Negatively Sloped
Answer: B

Question. Giffen Goods are —
(a) Conspicuous Goods
(b) Normal Goods
(c) Conspicuous Necessities
(d) Inferior Goods
Answer: D 

Question. Under which of the following situations the Law of Demand will not operate?
(a) Conspicuous Goods
(b) Giffen Goods
(c) Absolute Necessities
(d) All of the above
Answer: D

Question. When we say that the Demand for a commodity depends upon the money income of the Consumer, we are referring to —
(a) Income Effect
(b) Substitution Effect
(c) Demonstration Effect
(d) Utility Effect
Answer: A

Question. In case of Expansion and Contraction of Demand, the Demand Curve —
(a) Shifts to the right
(b) Shifts to the left
(c) Remains the same
(d) None of the above
Answer: C

Question. When Consumers feel that if the commodity is expensive, that it has got more utility, we are referring to —
(a) Inferior Goods
(b) Normal Goods
(c) Conspicuous Goods
(d) Giffen Goods
Answer: C

Question. Rise in quantity demanded of a product as a result of reduction in price is known as —
(a) Change in Demand
(b) Contraction of Demand
(c) Expansion of Demand
(d) Alteration of Demand
Answer: B

Question. Other things being equal, a fall in the price of complementary good will cause the of the other to rise.
(a) Price
(b) Supply
(c) Demand
(d) Utility
Answer: C

Question. In case of Contraction of Demand, the quantity demanded —
(a) Increases
(b) Decreases
(c) Becomes zero
(d) Becomes constant
Answer: B

Question. Which of the factors does not cause Decrease in Demand?
(a) Fall in the price of Substitute Goods
(b) Rise in price of this product
(c) Decrease in population
(d) Decrease in Income Levels of Buyers
Answer: B

Question. Expansion of Demand is associated with —
(a) Rise in Price, Rise in quantity demanded
(b) Fall in Price, Fall in quantity demanded
(c) Fall in Price, Rise in quantity demanded
(d) Rise in Price, Fall in quantity demanded
Answer: C

Question. Which of the following is not an exception to the Law of Demand?
(a) Conspicuous Goods
(b) Normal Goods
(c) Conspicuous Necessities
(d) Giffen Goods
Answer: B

Question. Why does the Law of Demand operate?
(a) Income Effect
(b) Substitution Effect
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Contraction of Demand is associated with —
(a) Rise in Price, Rise in quantity demanded
(b) Fall in Price, Fall in quantity demanded
(c) Fall in Price, Rise in quantity demanded
(d) Rise in Price, Fall in quantity demanded
Answer: D

Question. If the demand for Petrol remains the same even after the increase in petrol prices, it means Petrol is a —
(a) Normal Good
(b) Necessity
(c) Luxury Good
(d) Inferior Good
Answer: B

Question. Under which of the following situations the Law of Demand will not operate?
(a) Price Change expected by Consumer
(b) Consumer's lack of knowledge about prices
(c) All of the above
Answer: C

Question. Change in Demand as a result of the factors other than Price is known as —
(a) Shift in Demand
(b) Increases and Decrease in demand
(c) Change in Demand
(d) All of these
Answer: D

Question. In which of the following cases, does a shift in demand take place?
(a) Fall in demand for cigarettes, as a result of increased taxes
(b) Rise in the demand for two wheelers due to decrease in the sales tax
(c) Decline in electric power consumption due to rise in the power charges
(d) Decline in the sales of Diwali crackers due to sudden rains and floods
Answer: D

Question. Change in demand, as a result of the factors other than price is known as —
(a) Demand Fluctuation
(b) Contraction / Expansion of Demand
(c) Demand Shrinking
(d) Shift in Demand
Answer: D

Question. As per the Law of Demand, if the Price of a commodity , its Demand .......
(a) Increases, Decreases
(b) Increases, Increases
(c) Decreases, Increases
(d) Both (a) & (c)
Answer: D

Question. Under the Law of Diminishing Marginal Utility, Consumers continue buying till Price equals Marginal Utility. Hence at lower prices —
(a) Higher quantities will be demanded
(b) Lower quantities will be demanded
(c) No quantities will be demanded
(d) All of the above
Answer: A

Question. Expansion and Contraction of demand for a product occurs as a result of changes in —
(a) Price of the Commodity
(b) Factors other than Price
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. Suppose consumer tastes shift toward the consumption of apples. Which of the following statements is an accurate description of the impact of this event on the market for apples?
(a) There is an increase in quantity demanded of apples and in supply of apples.
(b) There is an increase in the demand and supply of apples.
(c) There is an increase in the demand for apples and a decrease in supply of apples.
(d) There is an increase in the demand for apples and an increase in the quantity supplied
Answer: D

Question. In case of Shift in Demand, remains constant.
(a) Income of Consumers
(b) Tastes and Preferences of Consumers
(c) Price of the Product
(d) Quality of the Product
Answer: C

Question. Decrease in Demand leads to —
(a) Inward shift of the Demand Curve
(b) Outward shift of the Demand Curve
(c) Upward movement on the same Curve
(d) Downward movement on the same Curve
Answer: A

Question. Conspicuous goods are also called as:
(a) Veblen
(b) Snob
(c) Prestigious
(d) All of the above
Answer: D

Question. Shift in demand does not take place due to —
(a) Change in the price of the product
(b) Change in the tastes and preferences
(c) Change in consumer habits
(d) Change in population
Answer: A

Question. An Increase in Demand can result from —
(a) Decline in Market Price
(b) Increase in Income
(c) Reduction in the Price of Substitutes
Answer: B

Question. Increase in Income Levels of Buyers leads to —
(a) Increase in Demand
(b) Decrease in Demand
(c) Expansion of Demand
(d) Contraction of Demand
Answer: A

Question. Since Consumers continue buying till Price equals Marginal Utility, if the price of a product is lower, the Consumer will attain equilibrium —
(a) At a lower quantity level
(b) At a higher quantity level
(c) At zero quantity level
(d) All of the above
Answer: B

Question. Giffen Goods are those goods —
(b) Which have a high income elasticity of demand
(c) Which are in short supply
(d) None of these
Answer: A