If the price of a product falls then quantity demanded tends to increase ceteris paribus because:
The MU/P ratio has decreased
Of the income and substitution effects
Consumers tend to feel poorer when prices fall
When price falls the demand curve shifts right
Correct Answer :
B. Of the income and substitution effects
when price of a product falls then consumer substitutes this product for others due to substitution effect and increase purchase generally since his real income (purchasing power) will increase due to income effect}
Related Questions
Consumer surplus is the difference between
Price demanded and price paid
Price quoted and price actually paid
Price that a consumer is willing to pay and the price actually paid
None of the above
The main contribution of Prof. Lord Keynes is in the field of:
Determination of the rate of interest
Determination of the market price
Determination of the wage rate
Determination of production of firm
Marginal revenue from a given output:
The price at which the marginal unit sells
Total revenue sale of all units divided by volume of sales
Average revenue of total output average revenue of last unit
The change in total revenue resulting from the sale of one unit more of output
Inputs or Factors of production are defined as:
Productive resources such as labor and capital equipment that firms use to manufacture goods and services are called inputs or factors of production
Unproductive resources that do not take part in production process are called inputs or factors of production
Firms own resources are called inputs or factors of production
None of the above
According to Marshallian approach, utility:
Can be added
Can be subtracted
Can be multiplied
Can be divided
The elasticity of substitution measures the percentage change in the ratio of inputs when any producer observes the percentage change in:
Output cost
Output ratio
Input prices
Input ratio
Which one of the following is also known as Plant Curves:
Long-run average cost (LAC) curves
Short-run average cost (SAC) curves
Average variable cost (AVC) curves
Average total cost (ATC) curves
In case of income effect, the level of consumers satisfaction rises when:
Income rises
Income falls
Sales rises
Price falls
Total variable costs in equation form are:
Labor theory was firstly rejected by:
Adam Smith
Karl Marx
Ricardo
Pigou
In the case of an inferior good, the income effect:
Partially offsets the substitution effect
Reinforces the substitution effect
Is equal to the substitution effect
More than offsets the substitution effect
The Modern and Neo-Keynsian Theory of Interestwas presented by:
Gunner Myrdal
A.C.Pigou
J.M.Keynes
J.R.Hicks
Microeconomics is also known as:
Price theory
Demand theory
Supply theory
Income theory
Money spent by a firm on the purchase of capital equipment is:
Fixed cost
Variable cost
Both fixed and variable costs
None of the above
The optimal strategy for a player is termed as:
Recessive strategy
Dormant strategy
Dominant strategy
Hidden strategy
When at a given price, the quantity demanded of a commodity is more than the quantity supplied, there will be:
An upward pressure on price
A downward pressure on price
Price will remain unaffected
All of the above
Monopoly means:
Where there is no retail trade and every thing is sold on wholesale basis
Where trading of a particular commodity is controlled exclusively by one firm
Where many people sell only one commodity
A form of business organization in which only single proprietorship exists
In the real world, some competitive firms owns specialized resources that earn a return called:
Economic profit
Rent
Accounting profit
Normal profit
The production function can convey to a firm:
The cost of producing any given output
The various combinations of input that could be employed in production of any given quantity of output
The various combinations of input that should be used in producing any given quantity of output in an efficient manner
The maximum profit level of output
The combination of labor and capital where the cost of a given output is minimized is known as:
Least cost factor combination
Optimum factor combination
Both a and b
None of them
In Prisoners Dilemma, both the prisoners are interrogated:
Separately in different cells
Collectively in different cells
Collectively in same cell
Separately in same cell
In a socialist (communist) economy the invisible hand:
Guides most resource allocation decisions
Operates effectively only in the labor market
Operates effectively only in the market for capital
Is prevented from operating effectively
When total revenue is maximum in monopoly, elasticity of demand is:
E =1
E >1
E <1
E =0
The imaginary differentiation is attributed to difference in:
Style
Salesmanship
Locality
All of these
The market demand for any commodity is the:
Average requirement for it in any given place
Amount of it wanted at any given price
Amount that people would like to buy during a period at different prices
Quantity needed to maintain a given standard of living
Utility means:
The want- satisfying power of a commodity
Usefulness of commodity
Eating of commodity
None of these
If the production increases under decreasing returns to scale, the cost will:
Increase at decreasing rate
Increase at constant rate
Decrease at increasing rate
Increase at increasing rate
By reducing the prices of its products below those of its competitors, a perfectly competitive seller:
Reduces its revenues
Increases its revenues
Can sell nothing
None of the above
To get more revenue, a Finance Minister impose tax on that commodity which has:
Inelastic demand
Elastic demand
Unit elasticity
Zero elasticity
An optimum level of a firms output is:
Where marginal cost is minimum
Where average cost is minimum
Where both the marginal and the average cost curves are at their respective minimum
Where the firm earns the maximum profits