Select correct option: Substitution effect Real income effect Income effect Pric

Question

Select correct option:
Substitution effect
Real income effect
Income effect
Price effect


If the cost of computer components falls, then
Select correct option:
The demand curve for computers shifts to the right.
The demand curve for computers shifts to the left.
The supply curve for computers shifts to the right
The supply curve for computers shifts to the left


The short run, as economists use the phrase, is characterisedby:
Select correct option:
All inputs being variable.
At least one fixed factor of production and firms neither leavingnor entering the industry.
No variable inputs - that is, all of the factors of production arefixed.
A period where the law of diminishing returns does not hold.


When an industry's raw material costs increase, other thingsremaining the same:
Select correct option:
The supply curve shifts to the left.
The supply curve shifts to the right.
Output increases regardless of the market price and the supplycurve shifts upward.
Output decreases and the market price also decrease.


The law of diminishing returns assumes:
Select correct option:
There are no fixed factors of production.
There are no variable factors of production.
Utility is maximised when marginal product falls.
Some factors of production are fixed.


Price floor results in:
Select correct option:
Equilibrium
Excess demand
Excess supply
All of the given options


If a decrease in price increases total revenue:
Select correct option:
Demand is elastic
Demand is inelastic
Supply is elastic
Supply is inelastic


If the income elasticity of demand is 1/2, the good is:
Select correct option:
A luxury.
A normal good (but not a luxury).
An inferior good.
A Giffen good.


Other things equal, expected income can be used as a direct measureof well-being:
Select correct option:
No matter what a person's preference to risk.
If and only if individuals are not risk-loving.
If and only if individuals are risk averse.
If and only if individuals are risk neutral.


When drawing demand and supply curves, economists are assuming thatthe primary influence on production and purchasing decisionsis:
Select correct option:
Price
Cost of production
The overall state of the economy
Consumer incomes

Explanation / Answer

If the cost of computer components falls, then : Thesupply curve for computers shifts to the left
The short run, as economists use the phrase, is characterised by:All inputs being variable.

When an industry's raw material costs increase, other thingsremaining the same: The supply curve shifts to theleft.

The law of diminishing returns assumes: Some factors ofproduction are fixed.

Price floor results in: Excess demand

If a decrease in price increases total revenue: Demand iselastic

If the income elasticity of demand is 1/2, the good is: Anormal good (but not a luxury).

Other things equal, expected income can be used as a direct measureof well-being: If and only if individuals are riskneutral.

When drawing demand and supply curves, economists are assuming thatthe primary influence on production and purchasing decisions is:Price

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