Theory of Demand and SupplyPYQ - May 2019Question 23 of 20

All but one of the following are assumed to remain the same while drawing the demand curve for a commodity. Which one is it?

Options

AThe preference of the individual

BHis monetary income

CPrice of the commodity

DPrice of related goods

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Correct Answer

✅ Option c — Price of the commodity

All Options:

AThe preference of the individual
BHis monetary income
CPrice of the commodity
DPrice of related goods

Detailed Solution & Explanation

To draw a demand curve for a commodity, certain assumptions are made to isolate the relationship between the price of the commodity and the quantity demanded. • The demand curve is a graphical representation of the law of demand, which states that as the price of a commodity increases, the quantity demanded decreases, ceteris paribus. • This means that all other factors that can affect demand are assumed to remain constant, such as the preference of the individual and his monetary income. • The price of related goods is also assumed to remain the same, as changes in these prices can shift the demand curve. • However, the price of the commodity itself is the variable being measured, so it cannot be assumed to remain the same. The correct answer is the one that involves a factor that is not held constant when drawing a demand curve. • Options like the preference of the individual and his monetary income are incorrect because they are assumed to remain the same. • The price of related goods is also assumed to remain constant, so it is not the correct answer. This is because the demand curve is drawn by changing the price of the commodity and observing the effect on the quantity demanded, while keeping all other factors constant.

About This Chapter: Theory of Demand and Supply

Paper

Paper 4: Business Economics

Weightage

10%

Key Topics

Law of Demand/Supply, Elasticity, Consumer Behavior

One of the most important chapters in the entire CA Foundation Economics paper. It covers the Law of Demand, Law of Supply, Elasticity of Demand (Price, Income, and Cross), Consumer Behavior (Cardinal and Ordinal approaches), and the concept of Consumer Surplus. Understanding demand and supply curves and their shifts is essential for grasping market dynamics.

View Official ICAI Syllabus

Exam Strategy Tip

Master the difference between 'Change in Demand' (shift) and 'Change in Quantity Demanded' (movement). This distinction alone can secure 3-5 marks. Also practice Elasticity numerical calculations.

Related Comparison Tables

Change in Demand vs Change in Quantity Demanded: 5 Marks Guaranteed

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