If the main objective of the government is to raise revenue, it should tax commodities with
high elasticity of demand
low elasticity of supply
low elasticity of demand
high income elasticity of demand
The Ramsey rule states that commodities with low elasticities of demand should be taxed at higher rates than commodities with high elasticities of demand. However, low-income people might spend a higher proportion of their incomes on commodities with low elasticities of demand (food, clothing, and so on) than might high-income people. Consequently, following the Ramsey rule may result in a regressive taxation scheme society may view as inequitable.
A firm is in equilibrium when its
marginal cost equals the marginal revenue
total cost is minimum
total revenue is maximum
average revenue and marginal revenue are equal
A consumer is in a state of equilibrium when he achieves maximum aggregate satisfaction on the expenditure that he makes depending on the set of conditions relating to his tastes and preferences, income, price and supply of the commodity etc. Producers' equilibrium occurs when he maximizes his net profit subject to a given set of economic situations. A firm's equilibrium point is when it has no inclination in changing its production. In short run Marginal revenue = Marginal Cost is the condition of equilibrium.
Engel's Law states the relationship between
quantity demanded and price of a commodity
quantity demanded and price of substitutes
quantity demanded and tastes of the consumers
quantity demanded and income of the consumers
Engel's law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises. In other words, the income elasticity of demand of food is between 0 and 1. Engel's Law doesn't imply that food spending remains unchanged as income increases: It suggests that consumers increase their expenditures for food products (in % terms) less than their increases in income.
'Law of demand' implies that when there is excess demand for a commodity, then
price of the commodity falls
price of the commodity remains same
price of the commodity rises
quantity demanded of the commodity falls
The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good. When there is excess demand of the commodity the price starts rising and it continues to rise till equilibrium price is reached.
If the change in demand for a commodity is at a faster rate than change in the price of the commodity, the demand is
If quantity demanded changes by a very large percentage as a result of a tiny percentage change in price, then the demand is said to be perfectly elastic. It reflects the fact that quantity demanded is extremely responsive to even a small change in price. Technically, the elasticity in this extreme case would be undefined but it approaches negative infinity as demand becomes more elastic.
An expenditure that has been made and cannot be recovered is called
In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken. The sunk cost is distinct from economic loss. Sunk costs may cause cost overrun.
Different firms constituting the industry, produce homogeneous goods under
The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another.
Economies of Scale means reduction in
unit cost of production
unit cost of distribution
total cost of production
total cost of distribution
In microeconomics, economies of scale are the cost advantages that an enterprise obtains due to expansion. "Economies of scale" is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.
Seawater, fresh air, etc., are regarded in Economics as
Free goods are what is needed by the society and is available without limits. The free good is a term used in economics to describe a good that is not scarce. A free good is available in as great a quantity as desired with zero opportunity cost to society.
If the price of an inferior good falls, its demand
can be any of the above
Some goods are known as inferior goods. With inferior goods, there is an inverse relationship between real income and the demand for the good in question. If real incomes rise, the demand for an inferior good will fall. If real incomes fall (in a recession, for instance), the demand for an inferior good will rise. Example: Bus travel. As people get richer, they are more likely to buy themselves a car, or use a taxi, rather than rely on the more inferior bus, so the demand for bus travel falls as real incomes rise.
The term "market" in Economics means
A central place
Presence of competition
Place where goods are stored
Shops and super bazars
The most important defining characteristic of a market in economics is that it allows buyers and sellers to exchange any type of goods, services and information. According to Walter Christaller's 'Central Place Theory,' a central place is a market center for the exchange of goods and services by people attracted from the surrounding area. The central place is so called because it is centrally located to maximize accessibility from the surrounding region.
All of the goods which are scarce and limited in supply are called
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
A situation of large number of firms producing similar goods is termed as :
The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical.
In Economics, production means
All factors of production like land, labour, capital and entrepreneur are required in combination at a time to produce a commodity. Production means creation or an addition of utility. Factors of production (or productive 'inputs' or 'resources') are any commodities or services used to produce goods and services.
Prime cost is equal to
Variable cost plus administrative cost
Variable cost plus fixed costs
Variable cost only
Fixed cost only
Prime Cost refers to a business's expenses for the materials and labor it uses in production. Prime cost is a way of measuring the total cost of the production inputs needed to create a given output. By analyzing its prime costs, a company can determine how much it must charge for its finished product in order to make a profit. Variable costs are expenses that change in proportion to the activity of a business. Variable cost is the sum of marginal costs over all units produced. It can also be considered normal costs. Fixed costs and variable costs make up the two components of total cost. Prime Cost = Direct Materials + Direct Labour+ Direct expenses. This comes to Variable cost + Administrative cost. Administrative cost is the cost associated with the general management of organization in accounting.
Economic problem arises mainly due to
scarcity of resources
lack of industries
The theory of Economic problem states that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs. The problem then becomes how to determine what is to be produced and how the factors of production (such as capital and labor) are to be allocated.
Bread and butter, car and petrol are examples of goods which have
Derived demand is a term in economics, where demand for one good or service occurs as a result of the demand for another intermediate/final good or service. This may occur as the former is a part of production of the second. For example, demand for coal leads to derived demand for mining, as coal must be mined for coal to be consumed. As the demand for coal increases, so does its price.
Perfect competition means
large number of buyers and less sellers
large number of buyers and sellers
large number of sellers and less buyers
None of these
The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market.
Given the money wages, if the price level in an economy increases, then the real wages will
If workers receive a higher nominal wage and the price level does not change, then the real purchasing power of their wages is higher and they are inclined to increase the quantity of labor supplied. If the workers receive the same nominal wage, but the price level increases, then the real purchasing power of their wages is lower and they are inclined to decrease the quantity of labor supplied. Any combination of changes in nominal resource prices or the price level that changes the purchasing power of resource prices entices resource owners to change quantities supplied.
Knowledge, technical skill, education etc. in economics, are regarded as
tangible physical capital
Human capital is the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value. It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural and psychological complexity as they interact in explicit and/or economic transactions.
The concept that under a system of free enterprise, it is consumers who decide what goods and services shall be produced and in what quantities is known as
Consumer sovereignty means that buyers ultimately determine which goods and services remain in production. While businesses can produce and attempt to sell whatever goods they choose, if the goods fail to satisfy the wants and needs, consumers decide not to buy. If the consumers do not buy, the businesses do not sell and the goods are not produced.
Economic rent does not arise when the supply of a factor unit is
Economic rent in the sense of surplus over transfer earnings arise when the supply of the factor units is less than perfectly elastic or not perfectly elastic. When the supply of factor units is perfectly elastic, there is no surplus or economic rent and the actual earnings and transfer earnings are equal. In such a scenario, at a given price or remuneration, the entrepreneur can engage any number of factor units.
Which of the following does not determine supply of labour ?
Size and age-structure of population
Nature of work
Marginal productivity of labour
The term 'supply of labour' refers to the number of hours of a given type of labour which will be offered for hire at different wage rates. Usually, it is found that higher the wage rates larger is the supply indicating a direct relationship that exists between the wage rate i.e. the price of labour and labour hours supplied. The supply of labour is very much affected by the work leisure ratio which in turn is affected by the changes in wage rates. The supply of labour in an economy depends on various economic and non-economic factors such as: population, sex composition, age composition of the population, willingness to work, wage rates, migration and immigration, working hours, social attitude and standard, legal barriers, education and training, employer's attitude, labour supply and leisure, efficiency of workers, etc. In economics, the marginal product of labor (MPL) is the change in output that results from employing an added unit of labor. It has nothing to do with the supply of labour.
The term mixed economy denoted existence of both
rural and urban sector
private and public sector
heavy and small industry
developed and under developed sector
The concept of mixed economy evolved from the ideas of Keynes. The concept of mixed economy means that both private enterprises and public enterprises coexist. However, the condition attached is that the private enterprises must work for serving the society rather than having only self interest. Further the private enterprises may not be allowed in every sector of the economy like area of national importance.
In an economy, the sectors are classified into public and private on the basis of
nature of economic activities
ownership of enterprises
use of raw materials
In an economy, the sectors are classified into private and public on the basis of ownership. Private sector is owned and managed by proprietors and partnerships while the public sector is wholly owned and managed by government.