CA Foundation · Business Economics · Theory of Demand and Supply
A household's demand for a good is given by Q = 200 − 5P + 0.01Y, where P is price in ₹ and Y is monthly income in ₹. At P = ₹20 and Y = ₹10,000, what is the quantity demanded, and what happens to it if income rises to ₹12,000 at the same price?
At price ₹20 and income ₹10,000, quantity is 200 − 100 + 100 = 200 units. When income rises to ₹12,000, quantity becomes 200 − 100 + 120 = 220 units, so demand increases by 20 units because income has a positive coefficient.
- A200 units; rises to 220 units
- B200 units; rises to 300 units
- C100 units; rises to 120 units
- D300 units; rises to 320 unitsCorrect
Explanation
At P = 20 and Y = 10,000: Q = 200 − 100 + 100 = 200 units. With Y = 12,000: Q = 200 − 100 + 120 = 220 units. Option 1 states this correctly.
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