CMA Foundation · Fundamentals of Business Economics and Management · Theory of Demand and Supply
The price of a good is expected to rise sharply next month, so households in Chennai buy more of it today at the current price. This is best described as:
This is an increase in demand. Expected future price rises are a non-price determinant, so buyers purchase more at the same current price and the demand curve shifts right. Because the current own price has not fallen, it is not an expansion of quantity demanded.
- AAn expansion of quantity demanded
- BA contraction of quantity demanded
- CA decrease in demand
- DAn increase in demandCorrect
Explanation
Expectations of future prices are a determinant of demand other than the current own price. Purchases rise at the unchanged current price, so the demand curve shifts right, which is an increase in demand. No fall in current price occurred, so it is not an expansion.
Did you get it right without looking?
One question tells you little. A timed set on Theory of Demand and Supply shows your real accuracy, how long you take and where you lose marks.
More Theory of Demand and Supply questions
- Which of the following would, by itself, lead to a fall in the equilibrium price of wheat flour with equilibrium quantity rising?
- A mobile accessories shop sells 120 phone chargers a week at ₹500 each. The shop cuts the price to ₹450 and sells 150 chargers a week, with …
- Which of the following is the usual explanation for the downward slope of a demand curve, based on the idea that each additional unit of a c…
- Starting from equilibrium in the market for electric scooters, the government increases the subsidy to buyers, which raises demand at every …
- Which of the following goods is most likely to have a relatively inelastic demand in the short run?
- The demand curve for a product is a rectangular hyperbola. Which statement about total expenditure by consumers on the product is correct?