Tag: business economics and quantitative methods

Questions Related to business economics and quantitative methods

Utility may be affected by the presence or absence of.

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. Substitute Goods

  2. Complementary Goods

  3. Both (a) and (b)

  4. Neither (a) and (b)

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Correct Option: C

The doctrine of consumer surplus is based on:

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. Indifference curve analysis

  2. Revealed preference theory

  3. Law of substitution

  4. The law of diminishing marginal utility

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Correct Option: D
Explanation:

The doctrine (principle) of consumer surplus is based on the law of DMU.

A rational consumer is a person who ____________.

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. behaves at all times, other things being equal, in a judicious manner.

  2. is influenced by persuasive advertising

  3. knows the price of goods in different market and buys the cheapest.

  4. has perfect knowledge of the market.

Show answer
Correct Option: A
Explanation:

A rational consumer is considered to be that person who makes rational consumption decisions.

 In other words, the consumer who makes his choices after considering all the other alternative goods (and services) available in the market is called a rational consumer.

In law of diminishing marginal utility, rationality means __________.

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. consumer is rational

  2. producer is rational

  3. firm is rational

  4. seller is rational

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Correct Option: A
Explanation:

In law of diminishing marginal utility, rationality of consumers refer to the situation when consumers take decisions with reason and logic and without any bias.

Law of diminishing marginal utility states that as the consumer buys more units of a commodity _________.

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. total utility falls

  2. marginal utility falls

  3. average utility falls

  4. both total and marginal utility falls

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Correct Option: B
Explanation:

Law of diminishing marginal utility states that as consumer will increase its consumption of a commodity, the marginal utility derived from every successive unit of consumption will decrease and a situation may come when marginal utility is zero or negative. 

Name the economists who developed:
Marginal utility theory - __________, and
Indifference curve theory - ________.

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. Marshall; Hicks

  2. Hicks; Marshall

  3. Marshall; Samuelson

  4. Robbins: Hicks

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Correct Option: A
Explanation:
  • Alfred Marshall was a British economist who developed most of the modern economic theory including utility analysis.
  • John Hicks was a British economist who criticized the utility theory and developed a newer theory on consumer behaviour known as the indifference curve theory. 

Which assumption implies the consumer aims at utility maximisation?

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. Rationality

  2. Ordinality

  3. Cardinality

  4. None of the above

Show answer
Correct Option: A
Explanation:

Rationality of consumers refer to the situation when consumers take decisions with reason and logic and without any kind of bias. When the consumer takes rational decision they try to get highest satisfaction by spending least amount of money.

An assumption of the constant marginal utility of money means the importance of money to the consumer is _________.

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. rising

  2. falling

  3. unchanged

  4. none of the above

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Correct Option: C
Explanation:

Constant marginal utility of money means that the utility per unit of money remains unchanged for the consumer. This implies that each additional unit of money provides the consumer with the same level of satisfaction. This leads to the use of money as the measuring rod in utility analysis. 

Which assumption of consumer theory states that if the consumer prefers A to B, then he will not prefer B to A in another time period?

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. Transitivity

  2. Preference

  3. Rationality

  4. Consistency

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Correct Option: D
Explanation:

According to the consistency theory, consumer will not change his preferences in another time period. So if he prefers commodity A over commodity B then he will never prefer B over A. It is one of the assumption of ordinal utility theory analysis.

Law of diminishing marginal utility states that when more and more units of a commodity are consumed, marginal utility ___________.

business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

  1. begins to increase

  2. remains constant

  3. begins to decrease

  4. becomes zero

Show answer
Correct Option: C
Explanation:

Law of diminishing marginal utility states that as consumer will increase its consumption of a commodity, the marginal utility derived from every successive unit of consumption will decrease and a situation may come when marginal utility becomes zero or negative.