Tag: supply

Questions Related to supply

Price helps in determining the allocation of scarce resources in the economy.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. True

  2. False

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Correct Option: A
Explanation:

In a market economy, prices of commodities in the market are determined by the forces of demand and supply that generates open competition in the market which leads to optimum utilization of scarce resources as the resources are utilized keeping in mind the demand by the consumer sector and profit made by it.  

Identify the functions of price mechanism in a market economy.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Coordination of economic decisions.

  2. Allocation of resources in the economy.

  3. Determination of factor incomes.

  4. All of the above.

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Correct Option: D
Explanation:
Functions of price mechanism in a market economy are :-
a) Coordination of economic decisions.b) Allocation of resources in the economy.
c) Determination of factor incomes.
Price mechanism can be defined as a process of determining the price of goods and services in the market using demand and supply forces.

___________ helps consumers to determine the level as well as the composition of consumption expenditure.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Market supply

  2. Price mechanism

  3. Income level

  4. Both A & C

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Correct Option: B
Explanation:

In price mechanism, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads distribution of goods and services according to the purchasing power of an individual where the consumers have freedom of choice between how much they will spend on consumption of goods and services. 

Price mechanism functions under the control of a specific controlling agency in the economy.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. True

  2. False

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Correct Option: B
Explanation:

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions.

____________ is fundamental to the operation of a free-enterprise economy.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Price legislation

  2. Government intervention

  3. Price mechanism

  4. Both B & C

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Correct Option: C
Explanation:

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions.

Price mechanism incorporates _________ in a market economy.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. rigidity

  2. flexibility

  3. severity

  4. complexity

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Correct Option: B
Explanation:

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e. supply will increase if price increases and vice-versa and the demand sector i.e. demand will increase if price decreases and vice-versa. Therefore, it adds more flexibility to the market economy because in market economy prices affect by the forces of demand and supply.  

Factor remunerations are the payments made by the consumer to purchase services from a firm.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. True

  2. False

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Correct Option: B
Explanation:

Factor remuneration refers to the payments which are done by the production sector to the private sector for hiring factor service i.e. capital, labour, land, and entrepreneurship in the form of interest, wages, rent, and profits respectively. 

Goods markets are those markets where ___________ are brought and sold.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. goods

  2. services

  3. both A & B

  4. neither A nor B

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Correct Option: C
Explanation:

Goods market refers to the market where goods and services which are required by the consumers are bought and sold against a common monetary measure i.e. rupees in case of India. 

In a ____________ economy, the producer operates with the objective of profit-maximisation.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. planned

  2. socialist

  3. free-enterprise

  4. all of the above

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Correct Option: C
Explanation:

In a free enterprise economy, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads to the survival of the fittest due to which profit maximization becomes the ultimate motive of all the producing sector. 

Which among the following is a function of price mechanism?

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Determination of savings in the economy.

  2. Determination of the level of economic activities.

  3. Guiding force for producers and consumers.

  4. All of the above.

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Correct Option: D
Explanation:

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa which determines the level of economic activity i.e. profitable activities in the economy with the accurate savings in the economy.