In an indifference curve diagram, when the price of a product increases, the decline in quantity demanded that results if consumers utility or welfare is kept constant is referred to as the:
Utility effect
Budget line effect
Substitution effect
Income effect
Correct Answer :
C. Substitution effect
The substitution effect of a price change measures the change in consumer purchases arising only from a change in relative prices, holding utility or welfare constant.}
Related Questions
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
Change in demand refers to:
Movement on the same demand curve
Upward shift of the demand curve
Downward shift of the demand curve
Upward or downward shift of the demand curve
The equilibrium of a firm is determined by the equality of MC and MR in only:
Under perfect competition
Under monopoly
Under imperfect competition
Under all the above market forms
Diseconomies of management lead to:
Decreasing returns to scale
Constant returns to scale
Increasing returns to scale
maximum returns to scale
Total Utility (TU) curve:
Always rises
Always falls
First falls and then rises
First rises and then falls
Law of Diminishing Marginal Utility is practically untrue because:
It is given to a lot of criticism
It is too difficult to be explained
It is based on assumptions which are unreal
Economists do not agree on this
Which is not a central problem of an economy?
What to produce
How to produce
How to maximize private profit
For whom to produce
Which of the following is not a U shaped curve:
Marginal cost curve
Average variable cost curve
Fixed cost curve
Average cost curve
The alternative of profit maximization theory is:
Cost maximization
Product maximization
Revenue maximization
None of the above
The main contribution of Prof.Robbins is in the field of:
human welfare
national income
multiplicity of wants and scarcity of resources
theory of production
Who stated explicitly for the first time the Law of Camparative Costs?
David Ricardo
Adam Smith
James Mill
A.C.Pigou
In the long run average costs curve, a firm can change:
Labour
Capital
Both of them
None of them
The difference between the average total cost and average variable cost as output increases will:
Increases
Remains the same
Diminishes
Zero
In centralized cartel, the firms are like:
Price takers
Price setters
Price discriminators
None of the above
The budget constraint equation of the firm is:
When there is decrease in demand the demand curve:
Moves (shifts) towards the axis
Moves (shifts) away from the axis
Remains unchanged
All of the above
For the given production function, technical inefficiency is defined as:
Sets of points relating production function that maximizes output given input (labor) i.e. Q = f(L, K)
Sets of points relating production function that produces less output than possible for a given set of input (labor) i.e. Q < f(L, K)
Use of imported technology
None of the above
If price exceeds AVC but in smaller than AC at the best level of output, the firm is:
Making a profit
Incurring a loss but should continue to produce in the short-run
Incurring a loss and should stop producing immediately
Making a normal profit
Total utility:
Diminishes with increased consumption
Reflects the overall level of satisfaction of the consumer
Is directly related to the price the consumer is willing to pay for a good or service
Is independent of price changes
Total costs are:
TFC TVC
TFC/TVC
TVC/TFC
TFC +TVC
Which is the first-order condition for the profit of a firm to be maximum?
AC=MR
MC=MR
MR=AR
AC=AR
If a good is an inferior good then an increase in incomes of the consumers will:
Increase demand for the good
Increase supply of the good
Reduce the equilibrium price of the good
None of the above
The kink demand curve faced by an oligopolist is based on the assumption that:
Competitors will follow a price increase but not a price cut
Competitors will follow a price increase as well as a price cut
Competitors will ignore both a price increase and a price cut
Competitors will ignore a price increase but will follow a price cut
Production function relates:
Cost to input
Wages to profits
Cost to output
Inputs to output
Regarding economic decisions, economics of uncertainty identifies:
No risks
Risks
Safety
None of the above
The minimization of costs subject to output requires equilibrium at the lowest:
Isoquant line
Isocost line
Indifference curve
Price line
If the commodity is inferior then Income Effect (I.E) is:
Negative
Positive
Zero
Infinite
In Edgeworth model, prices oscillate between:
Firms and industry price
Monopoly and duopoly price
Competitive and monopoly price
None of the above
An individual consumers demand is not determined by:
Price of the commodity
Price of the substitutes
His household income
Size of countrys population
The slope of the iso-cost line (budget line) is determined by:
Pricing of two factors
Productivity of the two factors
Degree of substitutability of two factors
None of the above