Classical

Business Economics - Business Economics MCQ

46:  

Price elasticity is computed by

A.

ep =( (P1 - P2) / Q1 ) X ((P1+P2) / Q2)

B.

ep = (((Q2- Q1) / Q1 ) / P1) X 100

C.

ep = ((Q2- Q1) / Q1 ) / ((P- P1) / P1)

D.

ep = (((Q2- Q1) / Q1 ) / Product) X 100

 
 

Option: C

Explanation :

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47:  

Income elasticity is computed by

A.

ei = (Y2 - Y1 ) / e

B.

ei = (Y1 - Y2 ) / P1

C.

ei = ( (Q2 - Q1 ) / Q​) / ( (Y2 - Y1 ) / Y​)

D.

ei = (Q2 - Q1 ) / P

 
 

Option: C

Explanation :

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48:  
Put into chronological order on the basis of development:
 l. Law of demand
2. Law of indifference
3. Law of diminishing marginal utility
4. Revealed preference curve
5. Indifference curve
A.

1 3 4 2 5

B.

1 5 3 4 2

C.

1 3 2 5 4

D.

1 2 3 4 5

 
 

Option: C

Explanation :

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49:  
Other things remaining the same, when a consumer's income increases, his equilibrium point moves to
A. A higher indifference curve
B. To the left-hand side on the same indifference curve
C. Remains unchanged on the same indifference curve
D. A lower indifference curve
 
 

Option: A

Explanation :

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50:  
Law of diminishing marginal utility is based on the assumption that
a. Tastes change over time
b. Consumption is continuous
c. Different units of goods consumed are homogeneous
 
Of these statements:

 

A.

Only a is true

B.

a and c are true

C.

b and c are true

D.

All are true

 
 

Option: D

Explanation :

Law is Based Upon Three Facts:
The law of diminishing marginal utility is based upon three facts.
First, total wants of a man are unlimited but each single want can be satisfied. As a man gets more and more units of a commodity, the desire of his for that good goes on falling. A point is reached when the consumer no longer wants any more units of that good.
Secondly, different goods are not perfect substitutes for each other in the satisfaction of various particular wants. As such the marginal utility will decline as the consumer gets additional units of a specific good. 
Thirdly, the marginal utility of money is constant given the consumer’s wealth.

 

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