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4

When the income of consumer increases then budget line will:

A. Get steeper

B. Shift parallel to right

C. To get flatter

D. To shift upward

Correct Answer :

B. Shift parallel to right


{Shown in below diagram}

The effect on the demand for a product as a result of an increase in income can also be analyzed using indifference curve analysis. An increase in income shifts the budget line out parallel. The relative prices of the products have not changed so the gradient of the budget line is the same; income has increased so the budget line has shifted outwards as more of the products can be purchased. The new combinations of products that maximize utility can be identified; from this the impact of income changes on the demand for a product can be analyzed. In the diagram above on the left B is a normal good. An increase in income increases the quantity demanded.

Related Questions

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4

Because the price elasticity of demand for OPEC oil is approximately .08, in order to increase revenues OPEC should:

A. Lower price in order to increase revenues

B. Lower price in order to decrease the amount of oil sold

C. Rise price in order to increase the amount of oil sold

D. Raise price in order to increase revenues

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4

Marginal cost curve cuts the average cost curve:

A. At the left of its lowest point

B. At its lowest point

C. At the right of its lowest point

D. None of the above

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4

Nash equilibrium is applicable in case of:

A. Cournot model

B. Edgeworth model

C. Chamberline model

D. Sweezy model

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4

Perfect competition assumes:

A. All buyers and sellers have perfect knowledge of the market

B. Freedom of entry of firms into the industry

C. Homogeneous product

D. All of the above

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4

Which of the following is not a property of indifference curve?

A. Convex to the origin

B. Slopes downwards to the right

C. Parallel to each other

D. Cannot intersect each other

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4

On an indifference map higher indifference curves show:

A. The same level of price

B. The same level of satisfaction

C. The higher level of satisfaction

D. The lower level of satisfaction

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4

Karl Marx:

A. Led the Russian Revolution

B. Provided the theoretical basis for socialism(communism)

C. Developed his theory in response to the Great Depression of the 1930s

D. None of the above

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4

The monopolist who is producing the same output from two (or more than two) plants is concerned with:

A. Single-plant monopolist

B. Multi-plant monopolist

C. Two-plant monopolist

D. Some-plant monopolist

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4

Repetition of a game (Repeated Game):

A. Yields the same outcome over and over

B. Can result in behavior that is different from what it would be if the game were played once

C. Is not possible

D. Makes cooperative games into noncooperative games

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4

Given a U shaped average cost curve, the relationship between average cost and marginal cost is such that marginal cost must always be:

A. Falling when average cost is falling

B. Rising when average cost is falling

C. Falling when average cost is rising

D. Rising when average cost is rising

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4

The modern cost curves are based upon the idea of:

A. Fixed capacity

B. Specific capacity

C. Excess capacity

D. Reserve capacity

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4

Perfect competition implies:

A. Differentiated goods

B. Homogeneous goods

C. Advertised goods

D. Distress sale of goods

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4

A monopoly producer usually earns:

A. Abnormal profits

B. Only normal profits

C. Neither profits nor losses

D. Profits and losses which are uncertain

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4

The amount of income left over for a consumer in equilibrium is :

A. Consumer surplus

B. Zero

C. Two rupees

D. Excess demand

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4

Marginal cost is the cost:

A. Of the last unit of production

B. Of marginal unit

C. Of marginal efficient units

D. Of the average units of production

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4

Cross-elasticity of demand is measured as:

A. Percentage change in the quantity of a commodity demanded divided by the percentage change in the price of that commodity

B. Percentage change in the quantity of commodity X divided by percentage change in the price of commodity Y

C. Percentage change in the quantity demanded of commodity X

D. Percentage change in the quantity demanded of commodity X divided by percentage change in the quantity demanded of commodity Y

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4

In case of complementary factors, the isoquants are:

A. L-shaped

B. J-shaped

C. M-shaped

D. V-shaped

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4

Marshallian approach is also known as:

A. Cardinal approach

B. Ordinal approach

C. Consumer approach

D. Production approach

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4

Equilibrium of a discriminating monopolist requires the fulfillment of which one of the following conditions?

A. It must be profitable to him to sell output in more than one market

B. Marginal revenue in both markets must be the same

C. Marginal revenue in both markets must also be equal to the marginal cost of producing the monopolists aggregate output

D. All the above

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4

The supply curve for the short-run competitive firm is the same as:

A. Marginal cost curve

B. Average variable cost curve

C. That part of the marginal cost curve which equals or is greater than AVC

D. Average total cost curve

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4

A mixed economy is characterized by the coexistence of:

A. Modern and traditional industries

B. Public and private sectors

C. Foreign and domestic investments

D. Commercial and subsistence farming

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4

Other things remaining the same, when a consumers income increases his equilibrium point moves to:

A. A lower indifference curve

B. A lower PPC curve

C. Remains on same indifference curve

D. A higher indifference curve

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4

The falling part of total Utility (TU) curve shows:

A. Increasing marginal utility

B. Decreasing marginal utility

C. Zero marginal utility

D. Negative marginal utility

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4

Price leadership is associated with:

A. Collusive oligopoly

B. Non-collusive oligopoly

C. Cartel

D. Perfect competition

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4

The giffen paradox is an exception to law of:

A. Supply

B. Demand

C. Production

D. Consumption

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4

Identify the work of Irving Fisher:

A. Policy on trade

B. Policy against inflation

C. The making of index numbers

D. Labor theory

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4

In cournot model, at equuilibrium when MC = MR, the elasticity of demand is:

A. equal to one

B. zero

C. negative

D. equal to 2

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4

The main contribution of Alfred Marshal is in the field of:

A. Research in mathematical economics

B. Economics of labor

C. Theory of production

D. Theory of demand

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4

The Strategy of Economic Development is the work of:

A. S.Kuznets

B. H.Liebenstein

C. A.O.Hirshman

D. Alfred Marshal

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4

Substitution effect means a consumer

A. Shifts away from the commodity the price of which has fallen

B. Shifts in favour of a commodity the price of which has risen

C. Shifts away from a commodity the price of which has risen, in favour of a commodity the price of which has fallen

D. None of the above