In the context of economic theory, the 'Law of Demand' is derived from: MCQ with Answer and Explanation

In the context of economic theory, the 'Law of Demand' is derived from:
A. Only the income effect
B. Both substitution and income effects for normal goods
C. Only the substitution effect
D. Increasing marginal utility
Answer: Option B
Solution (By JKSSB Mock Tests)
For normal goods, both the substitution effect and the income effect of a price change work in the same direction, reinforcing the inverse relationship between price and quantity demanded.

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Practice More Economy Set 1 Questions

Question #1
The 'World Trade Organization' headquarters is in:
A. Washington D.C.
B. Geneva
C. Paris
D. New York

Correct Answer: Option B


Explanation:
WTO headquarters is in Geneva.

This question belongs to: Economy GK Economy Set 1
Question #2
GDP at market prices equals GDP at factor cost:
A. plus indirect taxes minus subsidies
B. plus indirect taxes plus subsidies
C. minus indirect taxes minus subsidies
D. minus indirect taxes plus subsidies

Correct Answer: Option A


Explanation:
GDP at market prices = GDP at factor cost + indirect taxes - subsidies.

This question belongs to: Economy GK Economy Set 1
Question #3
A Giffen good is a good for which:
A. income effect is zero
B. demand is perfectly elastic
C. demand increases when price rises
D. demand falls when price falls

Correct Answer: Option C


Explanation:
A Giffen good has a strong income effect that dominates the substitution effect, so quantity demanded rises when price rises.

This question belongs to: Economy GK Economy Set 1