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CBSE Questions for Class 11 Commerce Economics Theory Of Consumer Behaviour Quiz 3 - MCQExams.com
CBSE
Class 11 Commerce Economics
Theory Of Consumer Behaviour
Quiz 3
The other name of price line is ________.
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price opportunity line
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price-income line or budget line
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budget constraint line
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all of the above
Explanation
All points on the budget lines are points of optimal efficiency. Wherein the consumer is maximizing his utility by utilizing his entire income. Points above the budget line are not attainable as it requires greater income.
Therefore the answer is all of the above.
A concave indifference curve represents ________.
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an abnormal consumer behaviour
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a normal consumer behaviour
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an ordinary consumer behaviour
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none of the above
Explanation
We will have an concave indifference curve when the two good on the indifference curve reduce utility. These could be inferior goods.
Indifference curve is also referred to ______________.
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Iso-utility curve
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Iso-quant curve
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Curve of equal utility
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Both (A) and (C)
Explanation
An iso quant curve is a firms indifference curve. It shows the all the combinations of input a firm can use to get the same level of output.
Iso-utility curve is another name for indifference curve.
The following figures represent the slope of indifference curves :Which is correct?
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Fig I
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Fig II
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Fig III
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Fig IV
A higher indifference curve shows a ___________.
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lower level of satisfaction
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higher level of satisfaction
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same level of satisfaction
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any one of these
The indifference curves are __________.
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concave to origin
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convex to the origin
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sloping downward
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sloping upward
An indifference schedule may be defined as _________________________.
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a schedule of various combination of two commodities that will be equally accepted by the consumer
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a schedule of various combination of more than two commodities that will be equally accepted by the consumer
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a schedule of single combination of two commodities that will be equally accepted by the consumer
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all of the above
Explanation
The indifference curve is a list of combination of two goods which would give the consumer the same amount of utility. Every point on the indifference curve would be a point where the consumer is indifferent. The indifference curve is downward sloping because for the consumer to purchase of more of some good, it has to give up some of another good.
An indifference curve may be defined as ________.
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the locus of the various combination of the two commodities which yield same level of satisfaction
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the locus of the various combination of two commodities which yield different levels of satisfaction
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the rate at which an individual will exchange successive unit of one commodity for another
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the locus of the various combination of more than two commodities which yield the same level of satisfaction
Explanation
The indifference curve is a combination of two goods which would give the consumer the same amount of utility and satisfaction.Every point on the indifference curve would be a point where the consumer is indifferent. The indifference curve is downward sloping because for the consumer to purchase of more of some good, it has to give up some of another good.
Price line depends on the __________.
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prices of two commodities
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income of the consumer
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related commodities
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both (A) and (B)
Which of the following is not a characteristic of indifference curves?
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Downward sloping to the right
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Non-intersecting
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Concave to the origin
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Convex to the origin
Explanation
Indifference curves are convex.
This means the are downward sloping. Indifference curves will only be concave if the good are inferior.
An indifference curve indicates _________.
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combination of two goods which yield different levels of satisfaction
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combination of two goods which yield same level of satisfaction
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combination of two or more goods which yield different levels of satisfaction
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a consumers preference for any two goods
Explanation
The indifference curve is a combination of two goods which give the consumer the same level of satisfaction.
Price line indicates __________.
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all possible combination for the consumer to buy with given income and prices of the two commodities
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all possible combination for the consumer to buy with given income and prices of the single commodity
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income of the consumer
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prices of related commodities
Explanation
All points on the budget lines are points of optimal efficiency. Wherein the consumer is maximizing his utility by utilizing his entire income. Points above the budget line are not attainable as it requires greater income.
The price line shifts from PL to $$PL_1$$ the reason is
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Price of commodity X falls
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Price of commodity X rises
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Price of commodity Y falls
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Price of commodity Y rises
An indifference curve slopes __________.
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downwards from left to right
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upwards from left to right
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upwards from right to left
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downwards from right to left
Explanation
An indiffference curve sloped downwards from left to right as it shows the quantity of good the consumer has to give up in order to purchase more of another good.
The indifference curve analysis also explains __________.
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the demand for inferior goods
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the demand for superior goods
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both (A) and (B)
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none of the above
Explanation
The indifference curve is a combination of two goods which would give the consumer the same amount of utility. Every point on the indifference curve would be a point where the consumer is indifferent. The indifference curve is downward sloping because for the consumer to purchase of more of some good, it has to give up some of another good.
We will have an concave indifference curve when the two good on the indifference curve reduce utility. These could be inferior goods.
At equilibrium, the slope of the indifference curve is ______.
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equal to the slope of the budget line
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greater than the slope of the budget line
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smaller than the slope of the budget line
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either greater or smaller than the slope of the budget line
Explanation
This is the point at which the consumer is spending all his income and purchasing the right of amount of both goods to maximize his level of satisfaction.
If the consumer is below his budget line, the consumer ______________.
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is in equilibrium
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is spending all personal income
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is not spending all personal income
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may or may not be spending all personal income
Explanation
When the consumer is not spending all his income, he/she is inefficient with the current group of goods purchased. The optimal point for the consumer is the point at which the indifference curve is tangent to the budget line.
Utility means _________.
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want satisfying power of commodity or service
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usefulness
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additional
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particular to general
Explanation
Utility is the want-satisfying power of a commodity. It is the satisfaction, actual or expected, obtained from the consumption of a commodity. It differs from person-to-person, place-to-place and time-to-time. It is the ability of a good to satisfy a want.
The criticism of indifference curve technique is ________.
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micro-economic in character
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weak ordering
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imaginary concept
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all of the above
Explanation
There are several criticisms of the indifference curve technique. They are as follows:
1) Assumptions of the analysis are unrealistic
2) It does no take into account the risk of the choices
3) It also has a weak ordering hypothesis
There are many other criticisms but these 3 highlight all of them briefly.
Every indifference curve to the right represents ________.
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lower level of satisfaction
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higher level of satisfaction
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constant level of satisfaction
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maximum level of satisfaction
Explanation
A consumers indifference curve will completely shift to the right if the price of both goods reduces or there is a rise in the consumers income.
In a wage system where an employee is paid a fixed amount irrespective of output is called ______.
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time rate system
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piece rate system
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time cum bonus system
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piece cum bonus rate system
Explanation
This can be explained with an example, if you get a monthly salary of Rs. 20,000, the salary will not change depending on the output you produce it depends on time the person involves.
It will remain even if you produce 10 units or even 20 units.
Which of the following is an external factor governing the prices?
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The elasticity of supply and demand and the goodwill of the company
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The cost policy
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The Management policy
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All the above
Explanation
The elasticity of supply and demand and the goodwill of the company are external factors governing the prices since these factors are not related to the picing of the product internally.
The inverse relationship between variations in the price and quantity demanded is not due to __________.
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Income Effects
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Substitution Effects
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Future Expectations
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Law of Diminishing Marginal Utility
Explanation
The inverse relationship between variations in the price and quantity demanded is not due to future expectations. Future expectation is a function of demand. When in future price of a commodity is expected to rise, then the demand of that commodity also rises in present times and vice-versa.
Price, Marginal Revenue and Elasticity are related to each other. When $$e = 1$$, then
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$$MR > 0$$
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$$MR < 0$$
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$$MR = 0$$
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$$MR = 1$$
Explanation
Price, Marginal Revenue and Elasticity are related to each other. When elasticity of demand is one, marginal revenue is equal to zero, this means when elasticity of demand is one then, the proportionate change in quantity demand is equal to the proportionate change in price.
The factors governing prices may be divided into _______.
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external forces and internal forces
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economic forces and non-economic forces
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homogeneous forces and hetrogeneous forces
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none of the above
Explanation
The factors governing prices may be divided into external forces and internal forces.
Internal forces affect the pricing of the commodity internally whereas external forces consist of forces from the external business environment.
For the inferior goods, demand falls when ______.
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price rises
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income rises
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price falls
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income falls
Explanation
An
inferior good
is a
good
whose
demand decreases
when consumer income
rises
(or
demand
increases when consumer income
decreases
), unlike
normal goods
, for which the opposite is observed
Match the items of List-I with those in List-II and select the correct code for the answer:
List-I
List-II
(a) Contraction of Demand
(i) Non-Price change effect
(b) Decrease in Demand
(ii) Demand curve remains the same
(c) Increase in Demand
(iii) Price change effect
(d) Expansion of Demand
(iv) Shifts the Demand curve
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$$(a) - (iii), (b) - (i), (c) - (iv), (d) - (ii)$$
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$$(a) - (iv), (b) - (iii), (c) - (ii), (d) - (i)$$
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$$(a) - (i), (b) - (ii), (c) - (iii), (d) - (iv)$$
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$$(a) - (ii), (b) - (iv), (c) - (i), (d) - (iii)$$
Explanation
a) Contraction of demand matches with price change effect, since contraction of demand refers to a situation when the demand decreases because of only price change.
b) Decrease in demand matches with non--price change effect since decrease of demand refers to a situation when the demand decreases because of change in other factors, other than price.
c) Increase in demand causes shifts in demand curve since increase of demand refers to a situation when the demand increases because of change in other factors, other than price.
d) Expansion of demand causes demand curve to remain same, since Expansion of demand refers to a situation when the demand increases because of only price change.
Demand must have the following elements_____________.
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Desire
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Want
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Quantity, Price and Time
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All of the above
Explanation
Demand must have the following elements: desire, want, quantity price and time. Demand refers to the desire to buy anything backed with sufficient purchasing power.
In a wage system where an employee is paid according to output is called ________.
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time rate system
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piece rate system
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time cum bonus system
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piece cum bonus rate system
Explanation
A piece rate system is wherein the worker is paid a amount equal to the number of units he/she produces. For example if a worker is paid Rs.20 per unit and the worker produces 10 units. The worker will get paid a total of Rs.200 for producing the 10 units.
Consumer is said to be in equilibrium maximizing his total utility, when:
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The marginal utilities of the two goods consumed are equal
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The proportions of the marginal utilities and respective price are equal
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The consumer gets full satisfaction from the consumption
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The consumer feels satisfied with his expenditure on the various goods
In which of the wage payment system an employee will be least interested in enhancing output?
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Time rate system
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Piece rate system
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Bonus payment system
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Time cum piece rate system
Explanation
A piece rate system is wherein the worker is paid an amount equal to the number of units he/she produces. For example if a worker is paid Rs.20 per unit and the worker produces 10 units. The worker will get paid a total of Rs.200 for producing the 10 units.
When the price of a commodity falls, we can expect __________.
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the supply of it to increase
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the demand for it to fall
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the demand for it to stay constant
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the demand for it to increase
Explanation
When the price of a commodity falls, we can expect the demand for it to increase. Law of demand states that when price increases, the demand for the commodity falls and vice-versa.
The demand curve for Giffen goods is ________.
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upward rising
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downward rising
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parallel to the quantity axis
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parallel to the price axis
Explanation
In case of Giffen goods, the demand curve has positive slope showing direct relationship between price and quantity demanded. The demand curve for Giffen goods is upward rising.
The demand for which of the following commodity will not rise in spite of a fall in its price?
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Television
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Refrigerator
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Salt
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Meat
Explanation
Salt is a necessary commodity. Therefore the demand for salt is perfectly inelastic, which means regardless of the changes in the price, quantity demanded by the consumers will not change.
The consumer is said to be in equilibrium when he plans his expenditure on $$x, y$$ and $$z$$ commodities in such a way that he ultimately attains.
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$$MU_{x} = MU_{u} = M_{z}$$
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$$\dfrac {MU_{x}}{P_{x}} = \dfrac {MU_{y}}{P_{y}} = \dfrac {MU_{z}}{P_{z}}$$
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$$\dfrac {MU_{x}}{P_{x}} = \dfrac {MU_{y}}{P_{y}} = \dfrac {MU_{z}}{P_{z}} = MU_{m}$$
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$$\dfrac {MU_{x}}{P_{x}} < \dfrac {MU_{y}}{P_{y}} < \dfrac {MU_{z}}{P_{z}} < MU_{m}$$
The demand curve shows that price and quantity demanded are________.
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directly related only
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directly proportional and also directly related
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inversely proportional and also inversely related
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inversely related only
Explanation
Law of demand states that when price increases, the demand for the commodity falls and when price decreases, the demand for the commodity rises.
The demand curve shows that price and quantity demanded are inversely proportional and also inversely related.
What is the relationship between price of a commodity and the demand for it?
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It is a positive relationship
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It is
an inverse relationship
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They are independent of each other
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They do not have any relationship
Explanation
As the price of any commodity increases the demand for that commodity decrease because it becomes expensive for the consumers. Similarly as the price of commodity decreases then demand for it increases because more of it could be bought
.Hence the relationship between price and demand of a commodity is inversely related.
If the price of an inferior goods falls, its demand _____.
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rises
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falls
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remains constant
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any of the above
Explanation
Inferior goods are an exception to the law of demand. They have an upwards slopping demand curve, and thus price and quantity share a positive relationship.
A want becomes a demand only when it is backed by the _________.
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ability to purchase
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necessity to buy
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desire to buy
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utility of the product
Explanation
A want becomes a demand only when it is backed by the ability of purchase. Demand of a commodity refers to the desire to buy the commodity backed with the purchasing power.
Consumption's function refers to which of the following?
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Relationship between income and employement
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Relationship between savings and investment
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Relationship between input and output
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Relationship between disposable income and consumption
What does the law of demand express?
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Effect of change in price of a commodity on its demand
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Effect of change in demand if a commodity on its price
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Effect of change in demand of a commodity over the supply of its substitute
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None of the above
Explanation
Law of demand states that when the price rises, the quantity demand falls and vice-versa. Law of demand express the effect of change in price of a commodity on its demand.
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Both Assertion and Reason are correct and Reason is the correct explanation for Assertion
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Both Assertion and Reason are correct but Reason is not the correct explanation for Assertion
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Assertion is correct but Reason is incorrect
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Both Assertion and Reason are incorrect
Explanation
1) The demand curve has negative slope showing inverse relationship between price and the quantity demanded- this is a correct statement as the price rises, demand falls and when the price falls, demand rises.
2) This applies to Giffen goods- this is a false statement since the law of demand does not apply to Giffen goods. The assertion is applicable to normal goods.
The functional relationship between income and consumption expenditure is explained by the _________.
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consumer's surplus
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law of demand
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law of supply
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Keynes's psychological law of consumption
Explanation
Law of demand states that when price increases, the demand for the commodity falls and when price decreases, the demand for the commodity rises.
The functional relationship between income and consumption expenditure is explained by the law of demand.
The demand curve shows that price and quantity demanded are inversely proportional and also inversely related.
Elasticity of demand measures the responsiveness of the quantity demanded of the goods to a _______.
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change in the price of the goods
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change in the price of substitutes
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change in the price of the complements
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change in the price of joint products
Explanation
Elasticity of demand measures the responsiveness of the quantity demanded of the goods to a change in the price of the goods. It is calculated by diving the proportionate change in quantity demand by proportionate change in price level.
The consumer is said to be in equilibrium when he plans his expenditure on x, y and z commodities in such a way that he ultimately attains:
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$$MU_x$$ = $$MU_y$$ = $$MU_z$$
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$$\frac{MU_x}{P_x}$$ = $$\frac{MU_y}{P_y}$$ = $$\frac{MU_z}{P_z}$$
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$$\frac{MU_x}{P_x}$$ = $$\frac{MU_y}{P_y}$$ = $$\frac{MU_z}{P_z}$$ = $$MU_m$$
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$$\frac{MU_x}{P_x}$$ < $$\frac{MU_y}{P_y}$$ < $$\frac{MU_z}{P_z}$$ < $$MU_m$$
Any statement about demand for a good is considered complete only when the following is/are mentioned in it (Choose the correct alternative):
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Price of the good
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Quantity of the good
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Period of time
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All of the above
Explanation
Any statement about demand for a good is considered complete only when quantity of good is mentioned in it.
Consumer's surplus is the highest in the case of ______.
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durable goods
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luxuries
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comforts
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necessities
Explanation
Consumer surplus is highest in the case of necessities because consumers would be willing to pay a very high price as it is essential for their survival. Also, the prices of these goods are generally regulated by the government and kept low. Hence, a very high consumer surplus.
Which type of elasticity plays a crucial role in determining international trade?
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Elasticity of demand
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Price elasticity of demand
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Income elasticity of demand
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Cross elasticity of demand
Consumption function expresses the relationship between consumption and ________.
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savings
0%
income
0%
investment
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price
Explanation
Consumption function expresses the relationship between income (F) and consumption (C).
We can prepare a schedule of the consumer expenditures at various levels of income-it is called the schedule of the propensity to consume or simply Consumption Function.
The law of equi- marginal utility is based on the law of _______.
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demand
0%
supply
0%
production
0%
diminishing marginal utility
Explanation
The law of equi marginal utility tells us that a consumer will distribute his income is such a way that the utility he gets from every dollar spent will be the same.
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