1. What does low price elasticity of demand for a commodity show?
- Necessity of the good
- It is a luxury good
- It doesn’t have importance
- It is an inferior good
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Answer: Necessity of the good
Low price elasticity of demand indicates that the quantity demanded of a commodity does not change significantly with changes in its price. Such goods are typically considered necessities as consumers continue to demand them even if their prices increase.
2. Which among the following is related to the demand curve?
- Relation between quantity demanded and price of a commodity
- Relation between supply and demand of a commodity
- Relation between income of customers and demand of a commodity
- None of the above
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Answer: Relation between quantity demanded and price of a commodity
The demand curve shows the relationship between the quantity of a commodity demanded by consumers and its price. It illustrates how the quantity demanded changes with variations in the price of the commodity.
3. Which of the following is correct regarding the law of demand?
- It is the relationship between Income and the price of the commodity
- Assumes Income of the customer should not change
- Assumes the Price of the commodity should not change
- It is the relationship between Income and Quantity demanded
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Answer: It is the relationship between Income and Quantity demanded
The law of demand states that the quantity demanded of a commodity varies inversely with its price, assuming other factors like income remain constant.
4. What is the demand of a commodity?
- Need of the commodity
- Desire for a commodity
- Quantity of a commodity demanded at a particular time at a particular price
- Amount of commodity demanded
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Answer: Quantity of a commodity demanded at a particular time at a particular price
Demand for a commodity refers to the quantity of a commodity that consumers desire to purchase at a specific price and are willing to buy in the market.
5. Which of the following is related to Microeconomics?
- The size of the national economy
- Inflation
- Unemployment
- Behavior of individual economic units
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Answer: Behavior of individual economic units
Microeconomics is a branch of economics that focuses on the behaviour of individual economic units, such as households, firms, and industries. It deals with the decision-making process and allocation of resources at the individual level.
6. Which of the following says that the marginal product of a factor input initially rises with its employment level, but after reaching a certain level of employment, it starts falling?
- Law of diminishing marginal product
- Law of variable proportions
- The Short Run
- The Long Run
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Answer: Law of variable proportions
The Law of variable proportions states that as the quantity of one factor input is increased while keeping other factors constant, the marginal product of that factor initially increases, reaches a maximum, and then starts to decline.
7. Which among the following is an example of a microeconomic variable?
- National Income
- Consumer’s Equilibrium
- Aggregate Supply
- Employment
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Answer: Consumer’s Equilibrium
Microeconomic variables are related to the behaviour of individual economic units such as households and firms. “Consumer’s Equilibrium” refers to the point where a consumer maximises their satisfaction from their available budget, which is a microeconomic concept.
8. Which of the following items is characterised by the highest income elasticity of demand among others?
- Car
- Milk
- Paddy
- Tobacco
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Answer: Car
Among the given options, the item “Car” is likely to have the highest income elasticity of demand. Income elasticity of demand measures the responsiveness of quantity demanded to changes in income. Luxury items like cars tend to have a high income elasticity, as an increase in income leads to a relatively larger increase in the quantity demanded for such goods.
9. A monopolist will be able to maximise his profits when
- His output is maximum
- He charges a Higher price
- His average cost is minimum
- His marginal cost is equal to the marginal revenue
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Answer: His marginal cost is equal to the marginal revenue
A monopolist maximises profits by producing the quantity at which marginal cost (MC) is equal to marginal revenue (MR). At this point, the additional cost of producing one more unit of output is equal to the additional revenue generated from selling that additional unit, leading to maximum profits.
10. If a commodity has more number of substitutes, the demand for this commodity will be
- more elastic
- less elastic
- inelastic
- perfectly elastic
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Answer: less elastic
When a commodity has more substitutes available in the market, consumers have greater flexibility to switch to alternative products if the price of one commodity increases. As a result, the demand for this commodity becomes less responsive to changes in price, making it less elastic.
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