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Income Determination Test - 16

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Income Determination Test - 16
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Weekly Quiz Competition
  • Question 1
    1 / -0
    Any point on the demand curve below the equilibrium point shows _____.
    Solution
    Excess demand is a situation where the quantity demanded of a good or service is more than the quantity supplied and its price is less than the equilibrium price determined by demand and supply. Hence, any point on the demand curve below the equilibrium point shows excess demand.
  • Question 2
    1 / -0
    Study of how the consumer decides, given his income and many alternative goods to choose from, what to buy when he knows the prices is called study of __________.
    Solution
    The theory of consumption is studied through the indifference map.
    The consumption function is created on the basis of the wants of the consumers (and plotted as an indifference curve) and the budget line represents the ability to pay and depends on the consumers' income. 
  • Question 3
    1 / -0
    The income elasticity demand for farm products is _____________.
    Solution
    Farm produce provides necessary commodities, which are consumed to fulfill the needs of the individual/household irrespective of the income level. The demand for necessities thus, is generally inelastic in nature.
  • Question 4
    1 / -0

    Graphically, when demand curve moves upward, there is __________.

    Solution
    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time.
    When the demand curve moves upward this shows that the price of good increases and the demand for goods falls this will show the upward movement in the demand curve
  • Question 5
    1 / -0
    If the marginal propensity to consume is greater than marginal propensity to save, the value of the multiplier will be _______________.
    Solution
    If the marginal propensity to consume is greater than marginal propensity to save, the value of the multiplier will be greater than 2. 
    When MPC >MPS, then the value of multiplier will be greater than 2 because the value of multiplier is directly related to the value of marginal propensity to consume. They both are directly related. In other words when MPC is more, k the multiplier is more and vice versa. 
  • Question 6
    1 / -0
    A person spends a portion of his monthly income on his household and the rest is saved. The ratio of his expenditure and saving is 27:2. Find his monthly saving when his monthly expenditure is Rs. 675__.
    Solution
    The ratio of expenditure and saving of the person is 27:2. If his monthly expenditure is Rs. 675, let his monthly savings be x. 
    Now, according to the given problem.
    675/x = 27/2 
    => x = (675 * 2)/27
    => x = 50 
    Therefore, his monthly savings will be Rs. 50. 
  • Question 7
    1 / -0
    Perfectly inelastic demand curve is ___________.
    Solution
    In case of perfectly inelastic demand the curve is a vertical straight line parallel to 'OY' axis. This is because the change in price of the product or service has no impact on the quantity demanded as the elasticity is equal to zero. 

  • Question 8
    1 / -0
    What would be total consumption from the following data if disposal income is Rs. $$2000$$ and consumption function is $$C=400+0.6$$Yd.?
    Solution
    C=400+0.6Yd 
    Yd = $$2000$$
    $$C=400+0.6$$(2000)
    =$$1600$$
  • Question 9
    1 / -0
    Equilibrium price and quantity is determined by ___________.
  • Question 10
    1 / -0
    How is marginal propensity to consumed expressed mathematically?
    Solution

    Marginal Propensity to consume refers to the percentage change in consumption for every one rupee of change in the income. It is the ratio between the change in income and corresponding change in consumption.

    Mathematically, 

    Consumption function (C) = c+ bY where c=autonomous consumption, b= marginal propensity to consume, and Y= income.

    Therefore, marginal propensity to consume is expressed as a product with the income earned by the economy. 


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