Question:

A negative income elasticity of demand for a commodity indicates that as income falls, the amount of the commodity purchased:

A.

Rises

B.

Falls

C.

Remains unchanged

D.

None of the above

Answer» a. Rises

Question:

Which method is used by Hicks to eliminate the income effect when price of aproduct is changed

A.

compensating variation in income

B.

the cost difference

C.

the over compensation effect

D.

substituting variation in price

Answer» a. compensating variation in income

Question:

Leakages are the factors which:

A.

Keep the power of multiplier stable

B.

Increase the power of multiplier

C.

Reduce the power of multiplier

D.

Reduce the power multiplier to zero.

Answer» c. Reduce the power of multiplier

Question:

Which of the following statements has been drawn by inductive method?

A.

A consumer will buy from the cheapest market

B.

All businessmen wish to buy at low price and sell at high price

C.

A private firm will try to maximize its profits

D.

The larger the stock of money with a person, the lower is the utility that he

Answer» b. All businessmen wish to buy at low price and sell at high price

Question:

A fall in income of the consumer, other things being equal, causes:

A.

Increase in demand

B.

Decrease in demand

C.

Increase in quantity demanded

D.

Decease in quantity demanded

Answer» a. Increase in demand

Question:

Substitution Effect is:

A.

Always negative

B.

Always positive

C.

Seldom negative

D.

Zero

Answer» a. Always negative

Question:

When an individual’s income rises, when everything else remains the same, his demand for normal goods:

A.

Rises

B.

Falls

C.

Remains the same

D.

Any of the above is possible

Answer» a. Rises

Question:

In classical theory the equality between saving and investment is brought about by:

A.

Rate of interest

B.

Income

C.

Consumption

D.

Multiplier

Answer» a. Rate of interest

Question:

When the total product curve is falling, the:

A.

Marginal product of labor is zero.

B.

Marginal product of labor is negative.

C.

Average product of labor is increasing.

D.

Average product of labor must be negative

Answer» b. Marginal product of labor is negative.

Question:

When the method of Statics is called upon to study a changing process, it is referred to as the method of:

A.

Statics

B.

Dynamics

C.

Comparative statics

D.

None of these

Answer» b. Dynamics