CA Foundation · Business Economics · Theory of Demand and Supply
The price of petrol rises sharply in India. Other things being equal, what is the most likely effect on the demand for new petrol-driven scooters?
Demand for petrol scooters shifts leftward. Petrol is a complement to scooters, so a higher petrol price raises the cost of use and reduces demand at every scooter price. This is a shift of the curve, not a movement along it, because the scooter's own price is unchanged.
- AMovement along the demand curve upward because the scooter price has risen
- BRightward shift of the demand curve for scooters
- CNo change, because petrol and scooters are unrelated
- DLeftward shift of the demand curve for scootersCorrect
Explanation
Petrol and petrol scooters are complements, so a rise in the price of petrol raises the running cost of scooters and lowers their demand at every price. This is a leftward shift of the demand curve. It is not a movement along the curve since the scooter's own price has not changed.
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
- A government imposes a price floor of ₹100 per liter on milk, set above the current equilibrium price of ₹80 per liter. Assuming supply and …
- Which of the following is generally likely to make the demand for a commodity more price elastic?
- Which of the following statements about the law of supply is correct?
- A cinema multiplex in Hyderabad cuts its ticket price from ₹250 to ₹200 and finds that its total revenue from ticket sales rises. Which conc…
- Which one of the following goods is most likely to have the LOWEST price elasticity of demand in the short run?
- A firm sells 600 units of a product at ₹50 per unit. The price elasticity of demand (absolute) is 2 over the relevant range. The firm cuts t…