Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Consumer behaviour

Question:

There is an anticipation that India and Pakistan border tensions over Jammu and Kashmir would rise in future and a war is foreseen. What changes will you see in the demand of oil?

Options:

Extension in demand

Contraction in demand 

Increase in demand 

Decrease in demand

Correct Answer:

Increase in demand 

Explanation:

Changes in the demand of a commodity can be categorised into 2 categories: 

  • Shift in the demand curve: When change in the demand is due to change in factors other than the own price of commodity.
  • Movement along the demand curve: When change in demand is due to change in the own price of the commodity.

Now, as the change in demand of oil is due to "War", which is a factor other than the price, that means, there will be an increase in demand of oil. Had it been a situation where the demand had risen due to fall in price, we would have called it extension of demand.