Theory of Demand Class 11 Important Questions

In this article, I have included all the most important questions of the Theory of Demand chapter. Along with the questions, I have also provided their answers.

1 Marker Questions

1. Define demand.
   Ans: Demand refers to the quantity of a commodity that a consumer can purchase at a given price during a given period.
   
2. What are the types of demand?
   Ans: Individual demand and market demand.
   
3. State the law of demand.
   Ans: Other things remaining constant, there is an inverse relationship between price and quantity demanded.
   
4. What is meant by market demand?
   Ans: Market demand is the total quantity of a commodity demanded by all consumers at different prices in a given period.
   
5. What is a demand schedule?
   Ans: A demand schedule is a tabular representation showing different quantities demanded at different prices.
   
6. What is a demand curve?
   Ans: A demand curve is a graphical representation of the demand schedule.
   
7. What is meant by a normal good?
   Ans: A normal good is one whose demand increases as income increases.
   
8. Define inferior good.
   Ans: An inferior good is one whose demand decreases as income increases.
   
9. What is meant by complementary goods?
   Ans: Complementary goods are those that are used together, e.g., car and petrol.
   
10. What is meant by substitute goods?
    Ans: Substitute goods are those that can be used in place of each other, e.g., tea and coffee.
    
11. Give one example of derived demand.
    Ans: Demand for labor depends on the demand for goods produced by labor.
    
12. State one assumption of the law of demand.
    Ans: Consumer’s income remains constant.
    
13. What is meant by price elasticity of demand?
    Ans: Price elasticity of demand measures the responsiveness of quantity demanded to changes in price.
    
14. What is unitary elastic demand?
    Ans: When the percentage change in quantity demanded is equal to the percentage change in price.
    
15. State one factor affecting demand.
    Ans: Price of the commodity.
    
16. What happens to demand when the price of complementary goods rises?
    Ans: Demand decreases.
    
17. What is a Giffen good?
    Ans: A Giffen good is an inferior good whose demand increases when its price rises.
    
18. What is meant by cross elasticity of demand?
    Ans: It measures the responsiveness of demand for one good to the change in price of another good.
    
19. What happens to the demand curve when there is an increase in consumer’s income?
    Ans: It shifts to the right.
    
20. Define movement along the demand curve.
    Ans: Change in quantity demanded due to change in price, keeping other factors constant.

3/4 Marker Questions

1. Explain three factors that can bring about an increase in the market demand for a commodity.
   
   Ans:
   • Increase in Income: Higher income increases demand for normal goods.
   • Change in Tastes and Preferences: If a commodity becomes more desirable, its demand rises.
   • Decrease in the Price of Complementary Goods: A fall in the price of a complement raises the demand for the good.
     
2. Define market demand. State the law of demand and the assumptions behind it.
   
   Ans:
   • Market Demand: The total quantity of a commodity demanded by all consumers at various prices.
   • Law of Demand: Price and demand are inversely related, keeping other factors constant.
   • Assumptions: No change in income, no change in preferences, and constant price of related goods.
     
3. Explain the effect of an increase in income of the consumer on the demand for a good.
   
   Ans:
   • Normal Goods: Demand increases as income rises.
   • Inferior Goods: Demand decreases with higher income.
   • Luxury Goods: Higher income leads to a significant increase in demand.
     
4. Explain the law of demand with the help of a demand schedule.
   
   Ans:
   • Definition: As price decreases, demand increases and vice versa.
   • Demand Schedule: A table showing different quantities demanded at various prices.
   • Illustration: The demand curve slopes downward from left to right.
     
5. State any three factors that cause an increase in demand for a commodity.
   
   Ans:
   • Increase in Population: More consumers lead to higher demand.
   • Advertising and Promotion: Effective marketing increases demand.
   • Expectations of Future Price Rise: Consumers buy more in anticipation of higher prices.
     
6. Distinguish between change in demand and change in quantity demanded of a commodity.
   
   Ans:
   • Change in Demand: Caused by non-price factors like income and tastes.
   • Change in Quantity Demanded: Caused only by price changes.
   • Effect: Change in demand shifts the curve, while change in quantity demanded moves along the curve.
     
7. Explain the inverse relationship between the price of a commodity and its demand.
   
   Ans:
   • Substitution Effect: As price rises, consumers switch to alternatives.
   • Income Effect: Higher prices reduce real income, lowering demand.
   • Diminishing Marginal Utility: Additional units provide less satisfaction, reducing demand at higher prices.
     
8. Differentiate between movement along demand curve and shift in demand curve.
   
   Ans:
   • Movement Along Demand Curve: Caused by a change in price of the commodity.
   • Shift in Demand Curve: Caused by changes in income, tastes, or related goods’ prices.
   • Graphical Representation: Movement remains on the same curve, while a shift creates a new curve.
     
9. What is meant by expansion in demand? Explain it with the help of a schedule and a diagram.
   
   Ans:
   • Definition: Expansion in demand means an increase in quantity demanded due to a fall in price.
   • Schedule Example: A table showing demand rising as price falls.
   • Graph: A downward movement along the demand curve.
     
10. Define the following terms:
    
    Ans:
    i) Increase in demand – When more quantity of a commodity is demanded at the same price due to factors like higher income or preference change.
    ii) Decrease in demand – When less quantity is demanded at the same price due to factors like lower income or unfavorable changes in preferences.
    iii) Contraction in demand – When quantity demanded decreases due to a rise in price, leading to an upward movement along the demand curve.
    
11. Distinguish between expansion in demand and increase in demand.
    
    Ans:
    Expansion in Demand: When quantity demanded rises due to a fall in price, moving downward along the same demand curve.
    Increase in Demand: When quantity demanded rises at the same price due to factors like increased income, shifting the demand curve rightward.
    Effect on Graph: Expansion is movement along the curve, whereas an increase shifts the entire curve.
    
12. Distinguish between decrease in demand and decrease in quantity demanded of a commodity.
    
    Ans:
    Decrease in Demand: A fall in demand due to factors like lower income, shifting the demand curve leftward.
    Decrease in Quantity Demanded: A fall in demand due to a price rise, moving upward along the same demand curve.
    Effect on Graph: Decrease in demand shifts the curve, while a decrease in quantity demanded moves along it.
    
13. Which changes can cause a leftward shift in the demand curve? Also state the change, which causes downward movement along the demand curve.
    
    Ans:
    Leftward Shift Causes: Fall in income (for normal goods), rise in price of complementary goods, unfavorable changes in preferences.
    Downward Movement Cause: A fall in price of the good itself leads to an increase in quantity demanded.
    Graphical Representation: A shift moves the whole curve; a movement stays on the same curve.
    
14. How is the demand of a commodity affected by changes in the price of related goods? Explain with the help of diagrams.
    
    Ans:
    Substitute Goods: A rise in the price of one good increases demand for its substitute (e.g., tea and coffee).
    Complementary Goods: A rise in price of one reduces demand for the other (e.g., cars and petrol).
    Graphical Explanation: A shift in the demand curve occurs based on changes in related goods’ prices.
    
15. Explain the effect of a rise in the prices of related goods on the demand for a good X.
    
    Ans:
    If X is a Substitute: Demand for X increases as the price of the alternative good rises.
    If X is a Complementary Good: Demand for X decreases as its complement’s price increases.
    Graph Representation: The demand curve shifts accordingly.
    

6 Marker Questions

Q1: Define demand. Explain any 6 factors that affect demand for a commodity.

Ans:

• Definition: Demand is the quantity of a commodity that consumers are willing and able to buy at different prices during a given period.
• Factors Affecting Demand:
  1. Price of the Commodity – Higher prices reduce demand; lower prices increase it.
  2. Income of Consumers – Higher income increases demand for normal goods and decreases demand for inferior goods.
  3. Price of Related Goods – Demand for a good changes with the price of its substitutes or complements.
  4. Consumer Preferences – Changes in trends and tastes influence demand.
  5. Population Size – More consumers lead to higher demand.
  6. Future Price Expectations – If prices are expected to rise, current demand increases.
     

Theory of Demand Class 11 Notes Economics

Q2: Explain the law of demand with the help of an imaginary schedule and diagram.

Ans:
Law of Demand: It states that other things remaining constant, the quantity demanded of a commodity falls when its price rises and vice versa.

Demand Schedule: Make an appropriate schedule and diagram.
Demand Schedule for Law of Demand

Q3: Distinguish between:
a) Individual demand and market demand

Ans:
Distinction Between Individual Demand and Market Demand

Difference Between Change in Demand and Change in Quantity Demanded

Q4: Explain the causes behind the law of demand.

Ans:
Causes of Law of Demand:

1. Substitution Effect – Consumers shift to cheaper alternatives when price rises.
2. Income Effect – Higher prices reduce purchasing power, lowering demand.
3. Diminishing Marginal Utility – Additional units of a good give less satisfaction, reducing demand at higher prices.
4. Multiple Uses of Goods – When a good becomes expensive, consumers prioritize essential uses over luxury.

Q5: Explain in brief, the various exceptions to the law of demand.

Ans:

• Exceptions to Law of Demand:
  1. Giffen Goods – Demand rises as price rises (inferior goods with no substitutes).
  2. Veblen Goods – Luxury goods have higher demand at higher prices (status symbol).
  3. Speculation Effect – Consumers buy more anticipating future price rise.
  4. Necessities – Basic goods are purchased regardless of price changes.

Q6: Explain the causes of a rightward shift in the demand curve of a commodity for an individual consumer.

Ans:

• Causes:
  1. Increase in Income – More purchasing power leads to higher demand.
  2. Rise in Price of Substitutes – Demand increases if alternative goods become costlier.
  3. Favorable Consumer Preferences – Trends or advertisements increase demand.
  4. Expectation of Future Price Rise – Consumers buy in advance, increasing demand.

Q7: Distinguish between an inferior good and a normal good. Explain the effect of change in income on each, giving suitable examples.

Ans:
Distinction Between Inferior Goods and Normal Goods

Q8: Explain causes of a leftward shift in the demand curve of a commodity.

Ans:
A leftward shift in the demand curve means a decrease in demand at the same price due to various factors.

Causes:

• Decrease in Consumer Income – For normal goods, a fall in income reduces demand.
• Increase in Price of Complementary Goods – If the price of a complement (e.g., petrol for cars) rises, demand decreases.
• Unfavorable Consumer Preferences – Trends and tastes changing unfavorably reduce demand.
• Fall in Population Size – A decrease in the number of consumers lowers demand.
• Higher Future Price Expectations – If consumers expect prices to fall, they postpone purchases, reducing demand.
• Government Policies – Increased taxation on a good decreases its demand.

Q9: Explain the effects of fall in the prices of related goods on demand for X with diagrams.

Ans:
A fall in the price of related goods affects the demand for good X based on whether the related goods are substitutes or complements.

1. Effect on Substitute Goods: If good X has a substitute (e.g., tea and coffee), a fall in the price of the substitute reduces the demand for X, as consumers switch to the cheaper alternative.
2. Effect on Complementary Goods: If good X has a complement (e.g., cars and petrol), a fall in the price of the complement increases the demand for X, as consumers find the overall cost of consumption lower.
3. Demand Curve for Substitutes: The demand curve for X shifts leftward when the price of its substitute falls, as consumers opt for the cheaper good.
4. Demand Curve for Complements: The demand curve for X shifts rightward when the price of its complement falls, as both goods are consumed together.
5. Real-Life Example: A fall in the price of butter reduces the demand for margarine (substitutes), while a fall in petrol prices increases car demand (complements).
6. Graphical Representation:
   • For Substitutes: The demand curve shifts left when the substitute’s price falls.
   • For Complements: The demand curve shifts right when the complement’s price falls.

Here is the detailed 6-mark answer for your question:

Q10: Explain how the following influence demand for a good:
i) Rise in income of the consumer
ii) Fall in prices of related goods

Ans:

The demand for a good is influenced by several factors, including changes in income and the prices of related goods.

1. Effect of Rise in Consumer Income:
   • For normal goods, an increase in income leads to a rise in demand (e.g., branded clothes, cars).
   • For inferior goods, an increase in income decreases demand, as consumers shift to superior alternatives (e.g., coarse grains, cheap footwear).
   • The demand curve for normal goods shifts rightward with rising income.
   • The demand curve for inferior goods shifts leftward with rising income.
   • If the good is a necessity, demand may remain unchanged despite an income rise.
   • Example: Demand for smartphones increases as income rises.
2. Effect of Fall in Prices of Related Goods:
   • Substitute Goods: If the price of a substitute (e.g., tea) falls, the demand for the other substitute (e.g., coffee) decreases, shifting its demand curve leftward.
   • Complementary Goods: If the price of a complement (e.g., petrol) falls, demand for the main good (e.g., cars) increases, shifting its demand curve rightward.
   • Consumers shift their preferences based on price advantage.
   • The effect is stronger for goods with high cross-elasticity of demand.
   • Example: A fall in butter price increases its demand while reducing margarine demand.

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