Which one of the following does not influence quantity demanded for a good ?
- A.Good's own price
- B.Price of a complementary good
- C.Price of a substitute good
- D.Prices of inputs into production of the good
Correct answer
Explanation
The correct answer is D, Prices of inputs into production of the good. Input prices change what it costs a firm to produce, so they shift the supply of a good, not the quantity that buyers want. Quantity demanded depends on the good's own price, which causes a movement along the demand curve, and on other factors that shift the whole demand curve: the buyer's income, tastes, expectations and the prices of related goods. A rise in the good's own price usually lowers the quantity demanded; this is the law of demand. Option A is wrong because the good's own price is the most direct influence on quantity demanded. Option B is wrong because a dearer complementary good, such as petrol for cars, reduces the demand for the good used with it. Option C is wrong because a dearer substitute raises demand for the good; costlier coffee, for instance, pushes buyers towards tea. Exam tip: input prices and technology shift supply; income, tastes and the prices of related goods shift demand.
Practice Questions
View allAmong the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?
- A.Spices
- B.Fresh fruits
- C.Pulses
- D.Vegetable oils
Show answer
Edible vegetable oils are India's largest agricultural import by value, and they have stayed at the top since well before this question was set.
Read the full explanation →'Broad-based Trade and Investment Agreement (BTIA)' is sometimes seen in the news in the context of negotiations held between India and
- A.European Union
- B.Gulf Cooperation Council
- C.Organization for Economic Cooperation and Development
- D.Shanghai Cooperation Organization
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The Broad-based Trade and Investment Agreement was the name given to the free trade agreement that India and the European Union began negotiating in 2007.
Read the full explanation →Consider the following statements : 1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries. 2. In terms of PPP dollars, India is the sixth largest economy in the world. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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Statement 1 is the definition of purchasing power parity, while statement 2 understates India's position. A PPP exchange rate is the rate at which the currency of one country would have to be converted into that of another to buy the same basket of goods and services in both.
Read the full explanation →What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'? 1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. 2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves. 3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future. Select the correct answer using the code given below :
- A.1 only
- B.2 and 3 only
- C.1 and 3 only
- D.1, 2 and 3
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The main and certain advantage of GST is that it subsumes many indirect taxes into one and creates a common national market.
Read the full explanation →Which one of the following is not a strategy in the Rainfed Area Development (RAD) scheme of India?
- A.Diversified farming
- B.Soil health management
- C.Adaptation of cluster-based approaches
- D.Optimizing canal irrigation
Show answer
Rainfed Area Development is meant for farms that depend on rain, not on canals, so improving canal irrigation is not one of its strategies.
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