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© All rights reserved Price : ` 485 Eighteenth Edition : September 2026 Published by : Taxmann Publications (P.) Ltd. Sales & Marketing : 59/32, New Rohtak Road, New Delhi-110 005 India Phone : +91-11-45562222 Website : www.taxmann.com E-mail : sales@taxmann.com Regd. Office : 21/35, West Punjabi Bagh, New Delhi-110 026 India Printed at : Tan Prints (India) Pvt. Ltd. 44 Km. Mile Stone, National Highway, Rohtak Road Village Rohad, Distt. Jhajjar (Haryana) India E-mail : sales@tanprints.com Disclaimer Every effort has been made to avoid errors or omissions in this publication. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. It is notified that neither the publisher nor the author or seller will be responsible for any damage or loss of action to any one, of any kind, in any manner, therefrom. No part of this book may be reproduced or copied in any form or by any means [graphic, electronic or mechanical, including photocopying, recording, taping, or information retrieval systems] or reproduced on any disc, tape, perforated media or other information storage device, etc., without the written permission of the publishers. Breach of this condition is liable for legal action. For binding mistake, misprints or for missing pages, etc., the publisher’s liability is limited to replacement within seven days of purchase by similar edition. All expenses in this connection are to be borne by the purchaser. All disputes are subject to Delhi jurisdiction only.
Contents PAGE
Chapter-wise Marks Distribution
I-5
Chapter-wise Comparison with Study Material
I-7
CHAPTER 1 NATURE AND SCOPE OF BUSINESS ECONOMICS
1.1
CHAPTER 2 2.1
CHAPTER 3 THEORY OF PRODUCTION AND COST
3.1
CHAPTER 4 PRICE DETERMINATION IN DIFFERENT MARKETS
4.1
CHAPTER 5 5.1
BUSINESS CYCLES
CHAPTER 6 DETERMINATION OF NATIONAL INCOME
6.1
CHAPTER 7 7.1
PUBLIC FINANCE
CHAPTER 8 8.1
MONEY MARKET
I-9
TAXMANN®
THEORY OF DEMAND AND SUPPLY
I-10
CONTENTS PAGE
CHAPTER 9 INTERNATIONAL TRADE
9.1
CHAPTER 10 INDIAN ECONOMY
TAXMANN®
SOLVED PAPER: SEPTEMBER 2026 (SUGGESTED ANSWERS)
10.1 P.1
2
C H A P T E R
C74>AH >5 34<0=3 0=3 BD??;H UNIT 1: LAW OF DEMAND & ELASTICITY OF DEMAND Meaning of Demand
price of a good other things remaining the same.
1. Demand for a commodity refers to:
(c) Willingness to pay for a good if income is larger enough.
(a) Desire backed by ability to pay for the commodity.
(c) The quantity demanded of that commodity at a certain price.
(d) Ability to pay for a good. 4. The quantity demanded is always expressed ________________. (a) Separately in isolation
(d) The quantity of the commodity demanded at a certain price during any particular period of time.
(b) Separately with quantity supplied
2. The term ‘demand’ refers to:
5. Which of the following statement is correct?
(a) Demand of money
(c) At a given price (d) None of these
(a) With the help of statistical tools, the demand can be forecasted accurately.
(b) Need for the commodity (c) Need for services (d) The quantity of a good or service that buyers are willing and able to purchase at various prices during a given period of time
(b) The more the number of substitutes of a commodity, more elastic is the demand. (c) Demand for butter is perfectly elastic.
[Dec. 2021] 3. Demand is the: (a) The desire for a commodity given its price and those of related commodities. (b) The entire relationship between the quantity demanded and the
(d) Gold jewellery will have negative income elasticity. [Nov. 2019] 6. The demand for a firm’s product when expressed as a percentage
2.1
TAXMANN®
(b) Need for the commodity and willingness to pay for it.
2.2
THEORY OF DEMAND AND SUPPLY
of industry demand it signifies the ____________ of the firm.
11. _______________ is not a determinant of demand for commodity.
(a) Product share
(a) Price of substitute commodities
(b) Market share
(b) Price of complementary goods
(c) Demand
(c) Consumer expectations about future price of the commodity
(d) Supply [June 2022] 7. The quantity demanded is a _______ _________.
(d) Quantity of stock of the commodity
(a) Flow
12. Which of the following is not a determinant of the demand for a good?
(b) Stock
(a) Its cost of production
(c) Single isolated purchase
(b) Expectations
(d) Concept without reference to time
(c) The prices of related products
8. Effective demand depends on:
(d) Preferences [MTP Jan. 2025]
TAXMANN®
(a) Price
13. Which is not an important factor that determines demand?
(b) Cost (c) Desire
(a) Price of commodity
(d) Product [Jan. 2021] 9. In economics, Effective Demand for a thing depends on : (a) Desire (b) Means to purchase (c) Willingness to use those means for that purchase (d) All of the above
(b) Disposable income of consumer (c) Tastes and preferences of buyers (d) Educational qualification of buyer [Dec. 2021] 14. Price of goods expresses value of _________. (a) Exchange (b) Cost
Determinants of Demand
(c) Demand
10. All of the following are determinants of demand except:
(d) Fair
(a) Tastes and preferences. (b) Quantity supplied.
15. Which of the following will affect the demand for non-durable goods?
(c) Income of the consumer.
(a) Disposable income
(d) Price of related goods.
(b) Price
[June 2023]
2.3
THEORY OF DEMAND AND SUPPLY
(c) Demography (d) All of the above [CA CPT May 2019]
20. Other things being equal, the demand for a good and the price of its complement has: (a) Positive relationship
16. What is not a determinant of demand?
(b) Direct relationship
(a) Consumer’s expectations
(c) Inverse relationship
(b) Consumer’s tastes and preferences
(d) Proportional relationship
(c) Income of the consumers
[Jan. 2026]
(d) Prices of unrelated goods.
21. Ceteris Paribus, the demand for a commodity is inversely related to its price. This happens because of :
[Jan. 2021] 17. What will happen to demand when a larger proportion of people belong to older age groups relative to younger age groups? (a) There will be increased demand for children’s books.
(a) Income Effect (b) Substitution Effect (c) Both (a) & (b) (d) None of above 22. ‘Ceteris Paribus’ is a Latin phrase that generally means:
(c) There will be increased demand for normal goods and services.
(b) An inverse relationship
(d) There will be decreased demand for goods and services.
(d) Tastes and preferences of consumers
(a) All other things being equal (c) Income of consumers
[Sep. 2025] 18. How does an increase in the income of consumers generally affect the demand for normal goods?
[Jan. 2025]
(b) It has no effect on the demand
23. With fall in price of commodity, demand of the commodity increases as it becomes relatively cheaper in comparison to other commodities. This effect is known as:
(c) It increases the demand
(a) Substitution Effect
(d) It makes the demand more elastic
(b) Income Effect
(a) It decreases the demand
[Sep. 2025]
(c) Law of Demand
19. The term “Ceteris Paribus” refers to _____________.
(d) Law of diminishing Returns
(a) Other things being equal (b) Other things also change
24. ___________________ is/are the types of Related Commodities.
(c) Other things may change
(a) Complementary
(d) None of the above
(b) Substitutes
[MTP Dec. 2024]
TAXMANN®
(b) There will be increased demand for geriatric care services, spectacles and walking sticks etc.
2.4
THEORY OF DEMAND AND SUPPLY
(c) Complementary and Substitutes
(c) Similar
(d) Complementary or Substitutes
(d) Unrelated
25. If we notice that an increase in the price of product X causes reductions in the demand for product Y, then we can conclude that these two products are:
30. Goods which are inferior, with no close substitutes easily available and which occupy a substantial place in consumer’s budget are called _____________ goods.
(a) Complements in consumption.
(a) Speculative
(b) Substitutes in consumption.
(b) Prestige
(c) Complements in production.
(c) Conspicuous
(d) Substitutes in production.
(d) Giffen
[MTP Jan. 2025]
[July 2021]
26. The increase in demand on account of an increase in real income is known as:
31. For Giffen good the angle Curve is:
TAXMANN®
(a) Substitution effect
(a) Vertical (b) Horizontal
(b) Income effect
(c) Negatively Sloped
(c) Marginal effect
(d) Positively Sloped
(d) Demand effect 27. Which one of the following set of Commodities represents Complementary goods?
[MTP Jan. 2025]
(b) Automobile and Petrol
32. Commodities for which the quantity demanded rises only up to a certain level of income and decreases with an increase in income beyond this level are called:
(c) Pen and ink
(a) Normal goods
(d) All of the above
(b) Inferior goods
28. Which of the following is not a set of complementary goods?
(c) Essential goods
(a) Tea and Sugar
(a) Car & Petrol (b) Electricity & Electrical Gadgets (c) Bread & Jam (d) Blazer & Jacket
(d) Luxury goods
33. When two commodities are complementary, a fall in the price of one (other things being equal) will cause the demand for the other to ________________.
[May 2026]
(a) Fall
29. __________ are those goods which are consumed together or simultaneously.
(b) Rise
(a) Complementary (b) Substitutes
[May 2025]
(c) Remain constant (d) Fall substantially
2.5
THEORY OF DEMAND AND SUPPLY
34. Two Commodities are called _________________ when they satisfy the same want and can be used with ease in place of one another.
(c) Snob effect (d) Veblen effect
[May 2025]
(c) Unrelated
39. Name the term which refers to the demand for consumer goods which is decreased owing be the fact that others are also consuming the same commodity.
(d) Opposite
(a) Halo effect
35. There is a ___________ relation between the demand for a product and the price of its substitutes.
(b) Snob effect
(a) Substitutes (b) Complementary
(a) Direct
(d) Demonstration effect 40. When some people start investing money in share market then many people start following the same without considering its advantage and disadvantages is called:
(b) Positive (c) Indirect (d) Both (a) & (b)
(a) Horizontal
(a) Demonstration effect (b) Snob effect (c) Veblan effect
(b) Vertical (c) Upward sloping to the right (d) Downward sloping to the right [June 2022] 37. Highly priced goods are consumed by status seeking rich people to satisfy their need for conspicuous consumption. This is called as: ______________. (a) Veblen Effect
(d) None of these [MTP Dec. 2024] 41. The value of the product or service is enhanced as the number of individuals using it increases. What effect is this? (a) Veblen Effect (b) Bandwagon Effect (c) Income Effect (d) Snob Effect
(b) Snob Effect (c) Helen Effect (d) None of these [July 2021] 38. Highly priced goods are consumed by status seeking rich people to satisfy their need for conspicuous consumption. This is called: (a) Demonstrative effect
[May 2025]
42. Consumption of high-priced goods by status seeking rich people for conspicuous consumption is called as ____ (a) Snob effect (b) Bandwagon effect (c) Demonstration effect (d) Veblen effect [June 2024]
TAXMANN®
36. In case of Veblen goods, the demand curve is:
(b) Bandwagon effect
(c) Veblen effect
2.6
THEORY OF DEMAND AND SUPPLY
43. _________________ are the commodities for which the quantity demanded rises only up to a certain level of income and decreases with an increase in money income beyond this level.
47. Snob effect is explained as:
(a) Inferior Goods
(d) None of these
(a) It is a function of consumption of others (b) It is a function of price (c) Both (a) and (b)
(b) Normal Goods
[RTP Jan. 2025]
(c) Consumption Goods (d) Durable Goods 44. The substitution effect will be what when the price of the product falls? (a) Zero (b) Negative (c) Positive TAXMANN®
(d) Lower cost [June 2022] 45. Mr. X and Mr. Y are rich rivals and, in a party, Mr. X wears an expensive dress and on seeing it Mr. Y who also has the same dress decided to reject the use of the same dress further. Rather Mr. Y will try to use an even more expensive one. Which effect affects Mr. Y? (a) Bandwagon Effect (b) Demonstration Effect (c) Snob Effect (d) Veblen Effect [Sep. 2024] 46. When goods are substitutes, a fall in the price of one (Ceteris Paribus) leads to in the quantity demanded of its substitutes?
48. The substitution effect will be stronger when: (a) The goods are closer substitutes (b) There is lower cost of switching to the substitute good (c) There is lower inconvenience while switching to the substitute good. (d) All of these [RTP Sep. 2024] 49. A group of people decrease or altogether stop consumption of a common to which of the following effect? (a) Bandwagon effect (b) Veblen effect (c) Snob effect (d) Marshall effect [July 2021] 50. The term demonstration effect was coined by _____________. (a) Hicks (b) Veblen (c) James Duesenberry (d) Marshall [Dec. 2021]
(a) Rise
51. Which of the following will affect the demand for non-durable goods?
(b) Fall
(a) Disposable income
(c) Constant
(b) Price
(d) No effect
(c) Demography (d) All of the above
2.7
THEORY OF DEMAND AND SUPPLY
52. Which of the following pairs of goods is an example of substitutes?
(c) Superior (d) Any of the above
(a) Tea and sugar. (b) Tea and coffee. (c) Pen and ink. (d) Shirt and trousers.
[Nov. 2020] 56. If the price of Pepsi decreases relative to the price of Coke and 7-UP, the demand for:
[MTP Jan. 2025]
(a) Coke will decrease.
53. The management of firm A observed that every time there is an increase in the price charged by firm B, the level of sales of firm A declines. But when firm C increases its price, the level of sales of firm A increases. From this we can conclude that:
(b) 7-Up will decrease.
(a) Firms A and B produce substitutes in consumption.
(c) Firms A and B produce unrelated in consumption products. (d) Firms A and C produce unrelated in consumption products [MTP Jan. 2025] 54. If the price of a good increases, then: (a) The demand for complementary goods will increase. (b) The demand for the good will increase. (c) The demand for substitute goods will increase. (d) The demand for the good will decrease. [MTP Jan. 2025] 55. When the price of petrol decreases, people reduce the consumption of diesel, then the goods are: (a) Complementary (b) Substitutes
(d) Coke and 7-Up will decrease. 57. Which of the following is an incorrect statement? (a) When goods are substitutes, a fall in the price of one (ceteris paribus) leads to a fall in the quantity demanded of its substitutes. (b) When commodities are complements, a fall in the price of one (other things being equal) will cause the demand of the other to rise. (c) As the income of the consumer increases, the demand for the commodity increases always and vice versa. (d) When a commodity becomes fashionable people prefer to buy it and therefore its demand increases. 58. What will happen in the rice market if buyers are expecting higher rice prices in the near future? (a) The demand for rice will increase. (b) The demand for rice will decrease. (c) The demand for rice will be unaffected. (d) None of the above. 59. Articles of prestige value used by rich people as status symbol for increasing their social prestige and/ or for displaying wealth is known as:
TAXMANN®
(b) Firms A and C produce substitutes in consumption.
(c) Coke and 7-UP will increase.
2.8
THEORY OF DEMAND AND SUPPLY
(b) Increase and the demand curve for fish will shift rightwards.
(a) Speculative goods (b) Conspicuous goods (c) Giffen goods
(c) Not change but there will be a movement along the demand curve for fish.
(d) Inferior goods [May. 2026] 60. Conspicuous goods are also known as: (a) Prestige goods. (b) Snob goods.
TAXMANN®
(c) Veblen goods. (d) All of the above. 61. A good which cannot be consumed more than once is known as: (a) Durable good (b) Non-durable good (c) Producer good (d) None of the above 62. A relative price is: (a) Price expressed in terms of money. (b) What you get paid for baby-sitting your cousin. (c) The ratio of one money price to another. (d) Equal to a money price. 63. The price of tomatoes increases and people buy tomato puree. You infer that tomato puree and tomatoes are: (a) Normal goods. (b) Complements. (c) Substitutes. (d) Inferior goods. 64. Chicken and fish are substitutes. If the price of chicken increases, the demand for fish will____________. (a) Increase or decrease but the demand curve for chicken will not change.
(d) Decrease and the demand curve for fish will shift leftwards. 65. If the price of X commodity increases and due to that the demand for Y commodity increases, then X and Y goods are ____________. (a) Complementary (b) Substitutes (c) Normal (d) Giffen 66. Potato chips and popcorn are substitutes. A rise in the price of potato chips will __________ the demand for popcorn and the quantity of popcorn will ________. (a) Increase; increase. (b) Increase; decrease. (c) Decrease; decrease. (d) Decrease; increase. 67. Increase in price of pulses leads to increase in demand of green vegetables. The pulses and green vegetables are _____________. (a) Substitutes (b) Complimentary goods (c) Normal goods (d) None of the above [June 2023] 68. When some people start investing money in the share market, then many people start following the same without considering its advantages and disadvantages. This is an example of:
2.9
THEORY OF DEMAND AND SUPPLY
(a) Veblen effect
(c) Speculative effect
(b) Bandwagon Effect
(d) None of the above
(c) Snob Effect
73. With a fall in the price of a commodity:
(d) Sheep Effect [Jan. 2025] 69. “High priced goods consumed by status seeking rich people to satisfy their need for conspicuous goods” is:
(a) Consumer’s real income increases. (b) Consumer’s real income decreases. (c) There is no change in the real income of the consumer.
(a) Veblen effect
(d) None of the above.
(b) Bandwagon effect (c) Snob effect
74. With an increase in the price of diamond, the quantity demanded also increases. This is because it is a:
(d) Demonstration effect
(a) Substitute good.
[CA CPT May 2018]
(b) Complementary good.
70. Which of the following is the price at which the quantity demanded of a commodity is equal to the quantity supplied of the commodity and there is no unsold stock or no unsupplied demand?
75. When the price of tea decreases, people reduces the consumption of coffee. Then the goods are:
(a) Selling price
(a) Complementaries
(b) Asking price
(b) Substitutes
(c) Future price
(c) Inferior goods
(d) Market clearing price
(d) Normal goods
71. If the price of Orange Juice increases, the demand for Apple Juice will ___________. (a) Increase
(d) None of the above.
[CA CPT May 2019] 76. If a short run supply curve is plotted for the following table which presents price and quantity of fighter aircrafts, what will be its shape? Price in millions of $
Number of Aircrafts
(c) Remain the same
124
28
(d) Become negative
140
28
72. At higher prices people demand more of certain goods not for their worth but for their prestige value This is called ____________.
150
28
160
28
175
28
(b) Decrease
(a) Veblen effect. (b) Giffen paradox.
(a) Horizontal straight line parallel to the quantity axis (b) Steeply rising with elasticity less than one
TAXMANN®
[July 2021]
(c) Conspicuous good.
2.10
THEORY OF DEMAND AND SUPPLY
(c) Vertical straight line parallel to Y axis (d) A perfectly elastic supply curve
(d) A fall in the price of the normal good, other things remaining the same
Demand Function
The Law of Demand
77. A Symbolic statement of a relationship between the dependent and the independent variables is called as _____________.
81. The Law of Demand, assuming other things to remain constant, establishes the relationship between:
(a) Function
(a) Income of the consumer and the quantity of a good demanded by him. (b) Price of a good and the quantity demanded. (c) Price of a good and the demand for its substitute.
(b) Sets (c) Equation (d) Variable 78. In a demand function, the demand for a product is the __________.
TAXMANN®
(a) Independent Variable (b) Explanatory Variable (c) Dependent Variable (d) Complex Variable 79. In a demand function, the determinants of demand like price, money income, tastes & preferences, etc. may be regarded as: (a) Dependent Variables (b) Independent Variables (c) Related Variables (d) Complex Variables 80. The demand curve of a normal good has shifted to the right. Which of the four events would have caused the shift? (a) A fall in the price of a substitute with the price of the good unchanged (b) A fall in the nominal income of the consumer and a fall in the price of the normal good (c) A fall in the price of a complementary good with the price of the normal good unchanged
(d) Quantity demanded of a good and the relative prices of its complementary goods. 82. What are exceptions to Law of Demand? (a) Law of Diminishing Marginal Utility (b) Substitution effect (c) Conspicuous goods (d) Different uses [Jan. 2021] 83. When Price of a commodity increases what will be the affect on Quantity demanded? (a) Increases (b) Decreases (c) No change (d) None of these [CA CPT Nov. 2018] 84. The substitution effect works to encourage a consumer to purchase more of a product when the price of that product is falling because: (a) The consumer’s real income has increased.
Business Economics (Economics) | CRACKER AUTHOR : PUBLISHER : DATE OF PUBLICATION : EDITION : ISBN NO : No. of Pages : BINDING TYPE :
Ritu Gupta Taxmann September 2026 18th Edition 9788167011824 560 Paperback
Rs. 485 DESCRIPTION Business Economics – CRACKER is a practice book. It has no theory chapters and no notes, only questions, answers and short explanations. It holds more than 3,500 questions across ten chapters, plus the full September 2026 paper with suggested answers at the end. Every question is printed with four options. Questions are arranged by topic, not by exam date. Each chapter is split into units, and each unit into named topics. So a student revising elasticity of demand finds every question on it in one place, instead of hunting through a dozen old papers. Past exam questions carry their source in square brackets. About half the chapter questions are tagged this way. The rest are written by the author to cover topics the examiner has not asked about yet, so no topic is left without practice. Each chapter closes with one answer key and a section called Hints of Selected Questions, which explains the answers that need working out rather than simple recall. The Present Publication is the 18th Edition, authored by Dr Ritu Gupta. The book’s value lies in how it sources, structures, and verifies its questions. Its principal features are: • [Solved Past Exam Questions] Questions from fifteen CA Foundation sittings going back to 2019, and from the older CA CPT papers, each showing the exam it came from • [The September 2026 Paper] The newest paper kept whole at the end, in its original order, with an answer key and an explanation for every one of its hundred questions • [Extra Practice Questions] About half the chapter questions are new ones by the author, placed where past exam coverage is thin • [Selected RTPs and MTPs of ICAI] Questions from ICAI’s recent Revision Test Papers and Mock Test Papers, tagged the same way • [Every Chapter Divided Into Topics] Ten chapters, split into units and then into named topics, with questions running in order under each • [Repeat Questions Marked] A question asked in more than one exam lists all those exams together, showing which ones keep coming back • [Hints of Selected Questions] For a calculation, the hint gives the formula, puts in the figures and works through to the answer. For a concept, it explains the concept • [Diagrams Drawn Out] Where a question turns on a curve, the hint redraws the diagram with labels instead of describing it in words • [Data Tables] Cost sheets, national income statements, money supply and budget figures set out as tables in the questions and again in the hints • [Different Question Types] Fill in the blanks, which option is wrong, sums to calculate, matching questions, and short situations built around a person or a firm • [Chapter-wise Marks Distribution] A table at the front giving the marks each chapter carried in the last eight exams, with an average for each • [Chapter-wise Mapping with ICAI Study Material] A second table at the front matching each chapter to its Study Material chapter, so the two can be read side by side
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