Which of the following is not a feature of a capitalist economy?
(a) Right to private property
(b) Existence of competition
(c) Service motive
(d) Freedom of choice for consumers
Solution: (c)
Capitalism is an economic system in which each individual in his capacity as a consumer, producer, and resource owner is engaged in economic activity with a large measure of economic freedom. The in spiring force in this system is self-interest and maximization of profit. The decisions of businessmen, farmers, producers, including that of wage-earners are based on the profit motive.
The demand for a commodity is a direct demand but the demand for a factor of production is called a
(a) Crossed demand
(b) Joint demand
(c) Derived demand
(d) Independent demand
Solution: (c)
In the words of McConnell, the demand for factors of production is a derived demand that is derived from the finished goods and services which resources help to produce. While the demand for good is direct demand, demand for factors is derived demand. It is based on the productivity of the factors.
HDI is an aggregate measure of progress in which of the three dimensions?
(a) Health, Education, Income
(b) Food Security, Employment, Income
(c) Agriculture, Industry, Services
(d) Height, Weight, Colour
Solution: (a)
The Human Development Index (HDI) is an aggregate measure of progress in three dimensions—health, education and income which are used to rank countries into four tiers of human development. The HDI was developed by the Pakistani economist Mahboob ul Haq working alongside Indian economist Amartya Sen.
The basis of determining dearness allowance to employees in India is _______
(a) National Income
(b) Consumer Price Index
(c) Standard of Living
(d) Inflation Rate
Solution: (b)
The Consumer Price Index Numbers for Industrial Workers CPI (IW) is utilized for fixation and revision of wages and determination of variable Dearness Allowances payable to workers in organized sectors of the economy. Despite the coverage being limited to Industrial Workers, presently, the CPI (IW) is also utilized as an indicator for measuring inflationary trend in the country and for policy formulations.
Lorenz curve shows
(a) Inflation
(b) Unemployment
(c) Income distribution
(d) Poverty
Solution: (c)
In economics, the Lorenz curve is a graphical representation of the distribution of income or of wealth. It was developed by Max O. Lorenz in 1905 for representing inequality of the wealth distribution.On the graph, a straight diagonal line represents perfect equality of wealth distribution; the Lorenz curve lies beneath it, showing the reality of wealth distribution
”The General Equilibrium Analysis” was developed by
(a) Marshall
(b) Ricardo
(c) Walras
(d) Adam Smith
Solution: (c)
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work ‘Elements of Pure Economics’. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
An indifference curve measures ______________ level of satisfaction derived from different combinations of commodity X and Y.
(a) same
(b) higher
(c) lower
(d) minimum
Solution: (a)
An indifference curve may be defined as the locus of points, each representing a different combination of two substitute goods, which yield the same utility or level of satisfaction to the consumer. Therefore, he is indifferent between any two combinations of goods when it comes to making a choice between them. So if, for example, a consumer makes five combinations a, b, c, d and e of two substitute commodities, X and Y, all these combinations yield the same level of satisfaction indicated by U.
What is included in the Tertiary sector?
(a) Banking
(b) Manufacturing
(c) Forestry
(d) Mining
Solution: (a)
The tertiary industry is the segment of the economy that provides services to its consumers. It includes a wide range of activities that service based and give non-tangible value to customers such as provision of trading, insurance, banking, etc. The other sectors are the secondary sector (manufacturing), and the primary sector (agriculture and allied activities).
The innovation theory of profit was proposed by
(a) Marshall
(b) Clark
(c) Schumpeter
(d) Joan Robbinson
Solution: (c)
The Innovation Theory of Profit was proposed by Joseph. A. Schumpeter, who believed that an entrepreneur can earn economic profits by introducing successful innovations. In other words, innovation theory of profit posits that the main function of an entrepreneur is to introduce innovations and the profit in the form of reward is given for his performance.
The elasticity of demand is the degree of responsiveness of demand of a commodity to a
(a) change in consumers’ wealth
(b) change in the price of substitutes
(c) change in consumers’ tastes
(d) change in its price
Solution: (d)
The elasticity of demand, also known as price elasticity of demand, is the degree of responsiveness of demand to change in price. Its measure depends upon comparing the percentage change in the price with the resultant percentage change in the quantity demanded. Thus, elasticity of demand is the ratio of percentage change in amount demanded to a percentage change in price.
