The relationship between price effect, income effect and substitution effect is:
P.E = S.E + I.E
S.E = P.E +I.E
I.E = P.E +S.E
S.E = P.E +2I.E
Correct Answer :
A. P.E = S.E + I.E
Related Questions
The consumer is in equilibrium at the where:
Budget line and indifference curve intersect each other
Budget line and indifference curve are tangent to each other
Budget line and indifference curve are opposite to each other
Budget line and indifference curve are parallel to each other
In cournot model firms:
Cannot make price adjustments
Can make price adjustments
Can adjust number of customers
None of the above
Consumers are likely to get a variety of similar goods under:
Monopoly
Perfect competition
Duopoly
Monopolistic competition
The situation in between the extremes of the govt. controlled, planned economy and the perfectly free, unplanned economy is known as:
Developed economy
Laissez-fair economy
Mixed economy
Capitalistic economy
Cross-elasticity of demand or cross-price elasticity between two perfect complements will be:
Negative
Positive
Infinite
Negative infinite
Efficient allocation of resources is likely to be achieved under:
Monopoly
Monopolistic competition
Perfect competition
Any market form
MC curve is:
L-shaped
U-shaped
V-shaped
Both a and b depending on situation
Marshallian approach is also known as:
Cardinal approach
Ordinal approach
Consumer approach
Production approach
In sweezy model (kinked demand curve model), the overall increase in costs of production:
Do not effect equilibrium
Affect equilibrium
Both a and b
None of the above
The coefficient of the price elasticity of demand is computed as the absolute value of the percentage change in quantity demanded divided by:
The change in price
The change in supply
The percentage change in supply
The percentage change in price
Elasticity of Substitution (s) is defined as:
Percentage change in capital-labor ratio dividing by percentage change in 
Percentage change in dividing by percentage change in capital-labor ratio
Percentage change in inputs dividing by percentage change in outputs
None of the above
When the slope of a demand curve is zero (also known as vertical demand curve) then elasticity will be:
Zero (perfectly inelastic)
Equal to one (unitary elastic)
Infinite (perfectly elastic)
None of the above
The name of the system of direct exchange is:
Price system
Barter system
Islamic economic system
Socialistic system
The marginal revenues are derivatives of:
TR function
AR function
MR function
AP function
Efficient allocation of resources is achieved to a greater extent under:
Monopoly
Perfect competition
Monopolistic competition
Oligopoly
A demand curve is not related to:
The price of the commodity
The time period
The price of substitutes
Any of the above
The effects according to which people use those goods which are concerned with distinctive standard of living are:
Bandwagon effects
Snob effects
Veblen effects
Steven effects
LMC represents change in LTC (long-run total cost) due to producing an additional unit of a good while the fixed and variable factors:
Cannot be changed
Can be changed
Can partially be changed
None of the above
An economic theory is :
An axiom
A proposition
A hypothesis
A tested hypothesis
If the demand curve remains unchanged and supply increases, the price will:
Rise
Fall
Remain the same
None of the above
In 1776, a famous book An enquiry into the nature and causes of the wealth of nation was written by:
J.S.Mill
Adam Smith
Robert Malthus
David Ricardo
In substitution effect, we:
Move to another indifference curve
Move along given indifference curve
Move to a higher indifference curve
Move to a lower indifference curve
The output where TC = TR & AC = AR:
Break-even point
Load point
Shut-down point
Revenue cost point
Necessary condition for consumer equilibrium is:
The partial equilibrium model keeps other things:
Variable
Constant
Increasing
Decreasing
In case of monopoly, the slope of MR is:
Always three times than the slope of AR
Always double than the slope of AR
Always equal to the slope of AR
None of the above
Slope of a demand curve is:
Not relevant to elasticity
The only factor determining elasticity
Only one of the factors influencing elasticity
None of the above
In first degree price discrimination, monopolist takes away :
All of the consumer surplus
All of the producer surplus
Some part of the consumer surplus
None of them
In Prisoners Dillemma, the players are:
Industrialists
Prisoners
Common men
Workers
At the point where a straight line demand curve meets the quantity axis (x-axis), elasticity of demand is:
Equal to zero
Equal to one
Equal to infinite
More than one