Deck 5: Demand Analysis and Utility Theory in Economics

Question 1

Measurable utility is the postulate of:

A)Neo-Classical school
B)Ordinalist school
C)Behaviourist school
D)Keneysians

Answer 1

Neo-Classical school

Question 2

Which of the following is Gossen's first law:

A)Law of Diminishing Marginal Utility
B)Law of Equi Marginal Utility
C)Law of substitution
D)Law of Diminishing Returns

Answer 2

Law of Diminishing Marginal Utility

Question 3

In the case of a free good, the consumer will be in equilibrium when:

A)MU = P
B)MU = 0
C)TU = 0
D)TU =1

Answer 3

MU = 0

Question 4

Change in demand due to a change in the price of related good :

A)Cross demand
B)Price demand
C)Income demand
D)None of these

Question 5

The Price and quantity relationship for an inferior good is:

A)Direct
B)Inverse
C)Positive
D)Indirect

Question 6

In the case of normal goods, the quantity demanded varies inversely with:

A)Price of good
B)Income of the consumer
C)Fashion of the good
D)Savings

Question 7

Which of the following is a cardinalist approach to demand analysis:

A)Marshallian utility analysis
B)Indifference Curve Analysis
C)Revealed Preference Theory
D)None of these

Question 8

The convexity of an indifference curve shows:

A)Diminishing MRS
B)Increasing MRS
C)Constant MRS
D)None

Question 9

A movement from one point to another along an indifference curve makes the satisfaction:

A)Increasing
B)Decreasing
C)Unaltered
D)None

Question 10

In the case of an indifference curve

A)dU/dX>dU/dY
B)dU/dX = dU/dY
C)dU/dXD)dU/dX?dU/Dy

Question 11

An Indifference Curve to the right of another represents combinations which are:

A)Indifferent
B)Preferable
C)Inferior
D)Superior

Question 12

As moving from left to right through an indifference curve, the MRS of X for Y

A)Increases
B)Remains the same
C)Decreases
D)Both A and C

Question 13

The slope of an indifference curve represents:

A)Price ratio of good X and Y
B)MRTS L,K
C)MRSx,y
D)MRS

Question 14

In the case of perfect complementaries, the MRS between goods is:

A)Zero
B)Positive
C)Negative
D)None

Question 15

In a combination of X and Y, if price of Y alone changes, the X intercept will :

A)Rotate upwards
B)Rotate downwards
C)Not be changed
D)Parallel

Question 16

At the point of tangency of an indifference curve with a budget line:

A)MRSxy =Px/Py
B)MRSxy>Px/PY
C)MRSxyD)MRSxy?Px/PY

Question 17

Commodities bought in larger quantities when income rises are called:

A)Normal goods
B)Inferior goods
C)Giffen goods
D)None

Question 18

Change in demand due to change in relative price alone is called:

A)Income effect
B)Substitution effect
C)Price effect
D)Ratchet effect

Question 19

Substitution Effect is:

A)Always negative
B)Always positive
C)Seldom negative
D)Zero

Question 20

If income effect works in the same direction to that of substitution effect, the good is a:

A)Normal good
B)Inferior good
C)Giffen good
D)Superior Good

Question 21

If income effect works in the direction opposite to that of substitution effect, the good is not:

A)Giffen good
B)Inferior good
C)Normal good
D)Superior Good

Question 22

Introspection is not the basis of :

A)Marshallian utility analysis
B)Indifference Curve Analysis
C)Revealed Preference Hypothesis
D)Demand Analysis

Question 23

The ordering of combinations on an indifference curve is:

A)Weak
B)Strong
C)Average
D)None

Question 24

Strong ordering is a distinguishing feature of the theory given by:

A)Marshall
B)Hicks
C)Samuelson
D)Adam Smith

Question 25

Father of Economics:

A)Marshall
B)David Ricardo
C)Adam Smith
D)J. M. Keynes