Tag: consumer's budget

Questions Related to consumer's budget

What happens to the budget line when consumer income increases but the price of goods remains unchanged?

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. Parallel upwards shift

  2. Parallel downwards shift

  3. Shift only on the x axis

  4. Shift only on the y-axis

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Correct Option: A
Explanation:

Greater the income with same prices would mean that the consumer can purchase more of both the goods on the budget line.

The other name of price line is ________.

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. price opportunity line

  2. price-income line or budget line

  3. budget constraint line

  4. all of the above

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Correct Option: D
Explanation:

All points on the budget lines are points of optimal efficiency. Wherein the consumer is maximizing his utility by utilizing his entire income.  Points above the budget line are not attainable as it requires greater income. 

Therefore the answer is all of the above.

Price line indicates __________.

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. all possible combination for the consumer to buy with given income and prices of the two commodities

  2. all possible combination for the consumer to buy with given income and prices of the single commodity

  3. income of the consumer

  4. prices of related commodities

Show answer
Correct Option: A
Explanation:

All points on the budget lines are points of optimal efficiency. Wherein the consumer is maximizing his utility by utilizing his entire income.  Points above the budget line are not attainable as it requires greater income. 

Price line depends on the __________.

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. prices of two commodities

  2. income of the consumer

  3. related commodities

  4. both (A) and (B)

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Correct Option: D

If the consumer is below his budget line, the consumer ______________.

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. is in equilibrium

  2. is spending all personal income

  3. is not spending all personal income

  4. may or may not be spending all personal income

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Correct Option: C
Explanation:

When the consumer is not spending all his income, he/she is inefficient with the current group of goods purchased. The optimal point for the consumer is the point at which the indifference curve is tangent to the budget line. 

In a wage system where an employee is paid a fixed amount irrespective of output is called ______.

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. time rate system

  2. piece rate system

  3. time cum bonus system

  4. piece cum bonus rate system

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Correct Option: A
Explanation:

This can be explained with an example, if you get a monthly salary of Rs. $20,000$, the salary will not change depending on the output you produce it depends on time the person involves.
It will remain even if you produce 10 units or even 20 units. 

In which of the wage payment system an employee will be least interested in enhancing output?

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. Time rate system

  2. Piece rate system

  3. Bonus payment system

  4. Time cum piece rate system

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Correct Option: B
Explanation:

A piece rate system is wherein the worker is paid a amount equal to the number of units he/she produces. For example if a worker is paid Rs.20 per unit and the worker produces 10 units. The worker will get paid a total of Rs.200 for producing the 10 units. 

In a wage system where an employee is paid according to output is called ________.

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. time rate system

  2. piece rate system

  3. time cum bonus system

  4. piece cum bonus rate system

Show answer
Correct Option: B
Explanation:

A piece rate system is wherein the worker is paid a amount equal to the number of units he/she produces. For example if a worker is paid Rs.20 per unit and the worker produces 10 units. The worker will get paid a total of Rs.200 for producing the 10 units. 

Consumption function expresses the relationship between consumption and ________.

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. savings

  2. income

  3. investment

  4. price

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Correct Option: B

Slope of budget line is equal to ________.

business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

  1. marginal rate of substitution between the factor inputs

  2. ratio of price of factor input

  3. demand of each factor input

  4. supply of each factor input

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Correct Option: B
Explanation:

The budget line shows the combination of two goods a individual can consume with his current income. Hence, it is equal to the ratio of prices between the two goods.