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The demand curve slopes downwards due to:

A. Income effect(I.E)

B. Substitution effect(S.E)

C. Taste effect

D. Both a and b

Correct Answer : D.


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.)

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  2. Income-elasticity of demand is expressed as:
  3. Compared to perfect competition, a monopolist will charge:
  4. A profit-maximizing monopolist in two separate markets will:
  5. The competitive equilibrium leads to:
  6. Each SAC represents a particular level of:
  7. When elasticity of demand is one (e=1), then following the formula MR=P[1-1/e], the MR will:
  8. A firm can never produce in the middle area of input space, in case of:
  9. Which of the following statement is wrong?
  10. To calculate the Economic Profit we must deduct which of the following cost from our total revenues?
  11. The cost that a firm incurs in purchasing or hiring any factor of production is referred to as:
  12. Contraction of demand means:
  13. For the given production function, technical inefficiency is defined as:
  14. In perfectly competitive markets, the profit maximization rule can be represented by:
  15. The total revenue curve for monopolist is the shape of:
  16. Total profits are maximized at the point where:
  17. In the immediate run:
  18. The game theory was basically presented by:
  19. The short-run periods in monopolistic competition are:
  20. In cournot model firms:
  21. If a straight line supply curve makes an intercept on the X-axis, the elasticity of supply is:
  22. The proportionality rule in production requires that the ratios of MP and factor prices are:
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  24. The fundamental choices that a society must make about the use of its resources include:
  25. Who first used the term Quasi-Rent?
  26. Marginal Utility (MU) curve is always:
  27. If the prices of goods rise then:
  28. Moving along the indifference curve leaves the consumer:
  29. The law of Diminishing Marginal Utility implies that the marginal utility of a good decreases as:
  30. If the factors have to be employed in a fixed ratio, then the elasticity of substitution under Leontief…