If the commodity is normal then the Income Effect (I.E) and the Substitution Effect (S.E):
Both move together and reinforce each other
One moves and the other remains constant
Move in the opposite direction and neutralize each other
Both remain constant
Correct Answer :
A. Both move together and reinforce each other
If the commodity is normal then the Income Effect (I.E) and the Substitution Effect (S.E) both moves together and reinforce each other.When price falls, both effects lead to a rise in quantity demanded and when price rises, both effects lead to a drop in quantity demanded.}
Related Questions
Scarcity is:
A relative term
An economic term
A dynamic term
As a whole term
If we measure the elasticity of demand with the help of the average and marginal revenue, the formula is:
Ed = AR/ (AR- MR)
Ed = MR/ (AR-MR)
Ed = AR/(MR-AR)
Ed = AR/ MR
Robbins definition of economics was criticised by:
Alfred Marshal
Adam Smith
J.B.Clark
Hicks, Longe and Durbin
Which cost increases continuously with the increase in production?
Average cost
Marginal cost
Fixed cost
Variable cost
Government planners play a central role in allocating resources:
Only under socialism(communism)
Only under capitalism
Under both (a) and (b)
None of the above
When a competitive firm is in equilibrium in the long-run, its output is such that:
Costs per unit of output are lowest
Total profits are highest
Marginal cost is lowest
Profit per unit of output is zero
In perfect competition, the slope of the total revenue curve of a firm is equal to the:
Market price
AVC
TFC
AFC
Identify the work of Irving Fisher:
Policy on trade
Policy against inflation
The making of index numbers
Labor theory
Of the following, which one is a characteristic of monopolistic competition?
Standardized product
Differentiate product
Two firms
No entry
The difference between the average total cost and average variable cost as output increases will:
Increases
Remains the same
Diminishes
Zero
In the case of an inferior commodity, the income-elasticity of demand is:
Positive
Unitary
Negative
Infinity
Change in demand (rise and fall of demand) is:
Due to change in price while other factors remain constant
Due to change in factors other than price
Both a and b
None of the above
Microeconomics deals with the:
Allocation of resources of the economy as between production of different goods and services
Determination of prices of goods and services
Behavior of industrial decision makers
All of the above
The law of Diminishing Marginal Utility implies that the marginal utility of a good decreases as:
It gets more expensive
A household consumes more of it
Preference changes
A households income goes up
In case of giffin good, price effect is:
Positive
Negative
Neutral
Infinite
The water diamond paradox was firstly resolved with the help of:
Labor theory of value
Individual theory of value
Producer theory of value
Consumer theory of value
The Hicksian indirect utility function in the form of equation is:
x =f(P)
x =a-bp
The marginal revenue of a perfectly competitive firm is:
Equal to the prices of its products
Positively related to output
Negatively related to output
Always higher than marginal cost
Diseconomies of management lead to:
Decreasing returns to scale
Constant returns to scale
Increasing returns to scale
maximum returns to scale
Scarcity means:
Nil resources
Limited resources
Many resources
Extra resources
Each SAC represents a particular level of:
Input
Output
Both of them
None of them
A producer attains the least cost combination when the relation between Marginal Rate of Technical Substitution (MRTS) and price (P) of the factors x and y is:
The act of producing the output from more than one plant is concerned with:
Monopoly
Multi-plant monopoly
Bilateral monopoly
Price discrimination
In market sharing cartel model, cartel determines the shares of:
the individuals
industry
firms
associations
A firm in a position of equilibrium is supposed to be maximizing:
Output
Sales
Profits
None of the above
Cross-elasticity of demand or cross-price elasticity between two perfect complements will be:
Negative
Positive
Infinite
Negative infinite
Elasticity (E) expressed by the term, 1>E>0, is:
Perfectly elastic
Relatively elastic
Unitary elastic
Relatively inelastic
With elasticity of demand, the:
Negative sign is ignored
Positive sign is ignored
None of them
Both of them
If the prices of goods rise then:
The real income of consumer falls
The real income of consumer rises
The real income of a consumer remains constant
The real income of consumer becomes zero
By scarcity the economist means that all goods are scarce relative the peoples:
Desire for them
Purchases
Production
Consumption