The substitution effect insures that anytime there is a change in the price of a

Question

The substitution effect insures that anytime there is a change in the price of a good, the quantity demanded along a compensated demand curve also changes.

True

False

When the quantity demanded by consumers goes up, we can be sure that there has been a rise in demand.

True

False

When a consumer spends all of the income, it must be true that they are consuming a basket of goods on their budget line.

True

False

The Marginal Benefit of consuming an additional unit of a good tends to increase as the number of units consumed increases.

True

False

Explanation / Answer

1)

This is true statement

Consumer tends to make change in the quantity demanded according to change in prices. Hence, there is movement along the compensated demand curve.

2).

This is False Statement.

Rise in quantity demanded may be accomplished if when there is rightward shift in supply of commodity.

3)

This is true statement.

Consumer can not consume beyond his budget line. Points beyond the budget line are inaccessible.

4).

This is false statement.

Marginal benefits from consumption of additional unit, keeps on falling.

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