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Question 40 of 41

Q.Increase in demand is caused by

(a) Increase in tax
(b) Higher subsidy
(c) Increase in interest rate
(d) decline in population
Puducherry TnboardTamil Nadu HSC First Year (DGE) Commerce Board 2026MCQ· 1mImportance★★★★★
98% · 40/41 Questions
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Of the options, a higher subsidy raises demand — option (b).

An increase in demand means consumers are willing to buy more at a given price (a rightward shift of the demand curve). We check each factor:

  • (a) Increase in tax — raises the price consumers pay, reducing demand. ✗
  • (b) Higher subsidy — a subsidy lowers the effective price and increases consumers' real purchasing power, so they buy more. This increases demand. ✓
  • (c) Increase in interest rate — makes borrowing costlier and saving more attractive, cutting spending, so demand falls. ✗ …
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