The demand curve slopes downwards due to:
Income effect(I.E)
Substitution effect(S.E)
Taste effect
Both a and b
Correct Answer :
D. Both a and b
The demand curve slopes downward due to I.E and S.E. According to S.E when a price of a commodity falls, it becomes relatively cheaper than other substitute commodities and as a result of this S.E, the quantity demanded of the commodity whose price has fallen, rises. According to I.E when the price of a commodity falls, the consumers real income or purchasing power increases, so he buy more of that commodity. This is called I.E.)
Related Questions
In repeated game, the Prisoners Dillemma can have a:
Non-cooperative outcome
Cooperative outcome
Dominant behavior
Recessive behavior
Total utility and price are:
Directly related
Unrelated
Closely related
Negatively related
The firm producing at the minimum point of the AC curve is said to be:
Operating under diminishing cost
Making optimum use of plant capacity
Operating at excess capacity
Operating under increasing costs
With the expansion of output, the short run average cost curve, beyond a point, starts rising because:
Average fixed cost increases sharply
More production yields lower per unit price
The law of variable proportions applies to short run production
Sales expenses become much larger
Each short run average cost curve:
Has to touch the long run cost curve
Has to cross the long run cost curve
Has to lie above all points on the long run cost curve
Coincides with the long run cost curve at some point
The games which played by players again and again are called:
Repeated games
Cooperative games
Non-cooperative games
Constant games
To get more revenue, a Finance Minister impose tax on that commodity which has:
Inelastic demand
Elastic demand
Unit elasticity
Zero elasticity
The horizontal demand curve for a commodity shows that its demand is:
Highly elastic
Perfectly inelastic
Perfectly elastic
Zero elastic
Under which of the following forms of the market structure does a firm have no control over the price of its product?
Monopoly
Monopolistic competition
Oligopoly
Perfect competition
Diseconomies of management lead to:
Decreasing returns to scale
Constant returns to scale
Increasing returns to scale
maximum returns to scale
The number of sellers in oligopoly are:
Two
Many
Four
Very few
Demand is consumers:
Ability to get a commodity
Willingness to get a commodity
Willingness and ability to get a commodity
Desire for a commodity
The Tit for Tat strategy means cooperation by the 2nd firm if:
1st firm does not cooperate
1st firm cooperates
1st firm collapses
None of the above
The basic subject matter of economics is:
Money
Capital resources
Scarcity
Inflation
On an indifference map higher indifference curves show:
The same level of price
The same level of satisfaction
The higher level of satisfaction
The lower level of satisfaction
In the long-run competitive equilibrium, the theory predicts that:
TC = TR and MC = MR
Firms operate at a minimum average total cost
There is no incentive for entry or exit of firms
All these conditions exist
Other things remaining the same, when a consumers income increases his equilibrium point moves to:
A lower indifference curve
A lower PPC curve
Remains on same indifference curve
A higher indifference curve
The difference between average total cost and average fixed cost shows:
Normal profits
Implicit costs
Variable costs
Opportunity costs
The difference between accounting profits and economic profits is:
Implicit costs
Explicit costs
Fixed costs
Variable costs
Using total revenue and total cost, a profit maximizing firm will be equilibrium at a point:
Where the gap between the two is the smallest
Where the gap between the two is the greatest
Where the two become equal
None of the above
If there are many firms producing similar but differentiated products, the competition is generally said to be:
Oligopoly
Pure competition
Perfect competition
Monopolistic competition
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 Input-Output Analysis was originated by:
W.W. Leontief
E.D.Domar
R.G.D.Allen
J.M.Keynes
The costs faced by the firm against variable factors are:
Variable costs
Fixed costs
Average costs
Marginal costs
In case of complementary factors, the isoquants are:
L-shaped
J-shaped
M-shaped
V-shaped
External economies are witnessed in:
A rising supply curve
A rising demand curve
A falling supply curve
A falling demand curve
Revealed Preference Theory was presented by:
Ricardo
Adam Smith
Pigou
Samuelson
To calculate the Economic Profit we must deduct which of the following cost from our total revenues?
Opportunity cost
Direct cost
Rent cost
Wage cost
Elasticity (E) expressed by the term, 8 >E>1, is:
Perfectly elastic (infinitely elastic)
Relatively elastic (greater than one elasticity)
Unitary elastic
Relatively inelasticity (less than one elasticity)
Average cost curve contains in it:
Normal profits
No normal profits
Sometimes normal profits and sometimes no normal profits
Super normal profits