Income and Substitution Effects

Q. 90% of first order process x---->y is completed in a time equals to 99% of another first order process y---->q. If k value of y---->q is 0.09sec-1, k value of x---->y will be?

Q. Substitution effect for a fall in the price of a commodity is given by _________.

1. an upward shift in indifference curve
2. an movement up of a given indifference curve
3. a downward shift in indifference curve
4. a movement down a given indifference curve

Q. The law of equi-marginal utility explains the equilibrium of a consumer when he consumes a single commodity.

1. True
2. False

Q. Purchasing power of money fall when

1. Price level increases
2. Income level increases
3. Price level decreases
4. Money supply falls

Q. Giffen goods must be inferior goods, while inferior goods, may or may not be Giffen goods. Comment.

Q. Law of demand must fail if less of a commodity is demanded even when the income of the buyer rises.

1. True
2. False

Q. If price rises the demand falls, if price falls demand rises. This is a ______.

1. law of supply
2. law of trade
3. law of demand
4. law of the nation

Q. When an individual's income falls (while everything else remains the same), his demand for inferior goods ____________.

1. increases
2. decreases
3. remains unchanged
4. can't be determined

Q. In real life, the elasticity of substitution between factors of production is _________.

1. zero
2. infinite
3. one
4. neither infinite nor zero

Q. Consumer attains the equilibrium position at a point when he maximizes his total utility given his income and price of commodities he consumes.

1. True
2. False

Q. A consumer will be in equilibrium if he spends his income with the help of ___________.

1. the marginal propensity to save
2. the marginal propensity to consume
3. the law of diminishing marginal utility
4. the law of equi-marginal utility