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Question

State whether the following statements are true or false. Give one reason for your answer:
a. Construction of dams can have negative impacts on the eco-system.
b. The demand for inferior goods rises when the income of a consumer increases.
c. A monopolist can sell the same product at different prices to different customers.
d. During inflation the debtors gain and creditors lose.
e. Labour is the beginning and end of production.

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Solution

a. True: Construction of dams have submerged large areas of agricultural land and forests surrounding these dams, thereby reducing the area under agriculture and forested land and causing ecological disaster.
b. False: When a consumer becomes richer he will start consuming more of a superior commodity in place of inferior commodity.
c. True: Monopoly is a market structure in which there exists only a single seller of the product, which has no close substitutes.
d. True: Debtors benefit during inflation because they had borrowed money when the purchasing power of money was high and they return it when its purchasing power has fallen due to price rise. While creditors tend to lose during inflation since the loan repaid and interest received would have less real value as a result of rise in prices.
e. True: Labour is a human factor and human beings serve as both end and means of all economic activities.

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