micro Flashcards
(193 cards)
1
Q
Who is considered as the founder of field of microeconomics
A
Adam Smith
2
Q
The term microeconomics has been derived from which word
A
Greek word mikros, which means small
3
Q
Which part of economics studies the behaviour of individual units of an economy
A
Microeconomics
4
Q
Which study of economics involves the highest degree of aggregation
A
Macroeconomics
5
Q
Which study of economics is also known as price theory
A
Microeconomics
6
Q
Macroeconomics is also known as
A
Income and employment theory
7
Q
Which study of economics involves limited degree of aggregation
A
Microeconomics
8
Q
Microeconomics and macro economics are interdependent. True or false. 
A
True
9
Q
If an individual saves, his family will be benefited, but if the whole economy start saving, it will result in contraction of demand. This is known as?
A
Micro macro paradox
10
Q
Define micro macro paradox
A
It means that an act which is beneficial for an individual, may prove to be harmful for the economy as a whole 
11
Q
The three reasons for existence of economic problem are
A
- Scarcity of resources
- Unlimited human wants
- Alternate uses
12
Q
Which economics deals with what are the economic problems and how they are actually solved
A
Positive economic’s
13
Q
Positive economics is _____ between ends
A
Neutral
14
Q
Positive economics are statements of truth. True or false
A
false
15
Q
Which economics tells us what ought to be or how the economic problem should be resolved
A
Normative economics
16
Q
Which economics aims to determine the ideals
A
Normative economics
17
Q
_____ Economics can be verified with actual data and is not suggestive however, _______ economics is suggestive and cannot be verified with data
A
18
Q
“Income inequality should be reduced”, statement is what type of economics
A
Normative economics
19
Q
Price theory is also known as
A
Microeconomics
20
Q
Income and employment theory is also known as
A
Macro economics
21
Q
National income and national output are examples of
A
Macro economics
22
Q
Demand and supply are tools of
A
Microeconomics
23
Q
Aggregate demand and aggregate supply are tools of
A
Macro economics
24
Q
Micro economics and macro economics are interdependent on each other. True or false
A
True
25
What are the three central problems of an economy
1.what to produce 2. How to produce 3. For whom to produce
26
The two aspects of what to produce are
What commodities to produce and how much to produce
27
What are the possible commodities that can be produced in an economy
Consumer goods, capital goods, civil goods/war goods
28
What are the two techniques of how to produce
Capital intensive technique and labour intensive technique 
29
The problem that relates to the distribution of produced goods and services among the individuals within the country, that is selection of the category of people who will ultimately consume the goods is called
For whom to produce
30
The cost of next best alternative foregone is called
Opportunity cost
31
The amount of other goods and services, that must be sacrificed to obtain more of anyone good, is called?
opportunity cost of that good
32
Production possibility frontier is also called?
Production possibility schedule, production possibility curve
33
_____ Refers to a graphical representation of all possible combinations of two goods that can be produced with given resources and technology
Production possibility curve
34
Number of units of a commodity sacrificed to gain one additional unit of another commodity is called
Marginal opportunity cost
35
MOC is always a) Increasing b) Decreasing c) Constant 
Increasing
36
Ratio of number of units sacrificed to gain additional unit of another commodity is called
Marginal rate of transformation
37
The formula of marginal rate of transformation is
Delta of units sacrificed upon Delta of units gained
38
What are the two properties of PPC
1. PPC curve slopes downwards
| 2. PPC is concave to the origin
39
Why does PPC slope downwards
Due to inverse relationship between change in quantity of one commodity and change in quantity of another commodity
40
More of one good can be produced only by taking resources away from production of another good, this leads to what characteristic of PPC
PPC sloping downwards
41
Why is PPF concave shaped
Increasing marginal rate of transformation
42
Where is MRT always increasing
because it is assumed that no resource is capable of producing all commodities with equal efficiency
43
does the economy always operate on PPF?
The economy operates on PPF if resources are fully and officiant utilised. Economy operate at any point inside PPF if resources are not fully and efficiently utilised
44
Can the economy operate any point outside ppf
No as it is unattainable with the available productive capacity
45
If the resources are used in the best possible manner then what is it called
Optimum utilisation of resources
46
Which two imaginary shapes can the PPF take
Convex and Downward sloping straight line
47
When will PPF be convex
If MRT is decreasing
48
When will PPF be a downward sloping straight line
If MRT is constant
49
an advancement or upgradation of technology or growth of resources leads to what change in PPF
rightward shift in PPF
50
Discovery of new natural resources will lead to what change in PPF
Rightward shift
51
Improved hygienic environment due to clean India Mission will lead to what change in PPF
Right word shift
52
Technological degradation will lead to what shift or movement in PPF
Left word shift
53
Destruction of resources in an earthquake will lead to what change in PPF
Left word shift
54
Skill development of human resources due to establishment of educational institutes or schemes like Pradhan Mantri Kaushal Vikas Yojana Will lead to what type of shift
Right word shift in PPF
55
Rotation in PPF occurs due to changes in what
Rotation for commodity on X axis will be a consequence of technological improvement or degradation or increase or decrease of productive resources for commodity X
56
Technological improvement or increase in resources for production of commodity on Y axis will lead to
Right word rotation of PPF on Y axis
57
Who propounded the cardinal utility approach
Marshall
58
Cardinal utility approach is also called
Marshall Utility analysis
59
Hicks and Alan give which theory
Ordinal utility approach
60
Indifference curve analysis is the other name for which theory
Ordinal utility approach
61
Which approach considers utility as a measurable value
Cardinal utility approach
62
Which utility approach considers utility as immeasurable and can be only ranked
Ordinal utility approach 
63
“Utility is the ability of a good to satisfy a want” Whose words are these?
Professor Hobson 
64
___ Refers to want satisfying power of a commodity
Utility
65
Imaginary measure which measures utility is called
util 
66
Util is part of which theory
Cardinal utility approach
67
Utility is the same as usefulness. True or false
False
68
Utility is the same as pleasure. true or false?
false
69
utility is objective. true or false?
false
70
Which of the following statements is true?
a) utility is not the same as usefulness
b) utility is the same as pleasure
c) utility and satisfaction are not the same
d) utility is objective
a)
71
____ Refers to the total satisfaction obtained from consumption of all possible units of a commodity
Total utility
72
Formula for total utility is
TUn = U1 + U2 + U3 + U4...... Un
73
Additional utility derived from consumption of one more unit of the given commodity is known as
Marginal utility
74
Formula for marginal utility is
MUn = TUn - TUn-1
75
formula for total utility which includes number of units added is
DELTA TU/ DELTA Q
76
Total utility is summation of marginal utility. True or false
true
77
When MU is positive then TU is?
Increasing at a diminishing rate
78
When MU is zero, then TU is
Maximum constant
79
What is maximum total utility also called as
Point of satiety 
80
When marginal utility becomes negative what happens to total utility
Starts decreasing
81
Negative utility is also known as
Disutility
82
Point of maximum satisfaction is also known as
Point to satiety 
83
Which law states that as we consume more and more units of a commodity the utility derived from each successive unit goes on decreasing
Law of diminishing marginal utility
84
Who gave the law of diminishing marginal utility
German economist HH Gossen 
85
What are the assumptions of law of diminishing marginal utility
1. Rational consumers
2. Continuous consumption
3. No change in quantity
4. MU of money remains constant
5. Fixed income and prices

86
Law of diminishing marginal utility is a qualitative or quantitative statement
Qualitative
87
Another name for fundamental of satisfaction is
Law of diminishing marginal utility
88
Fundamental psychological law is also called
Law of diminishing marginal utility
89
Consumers who does not intend to change his level of the consumption and the derives maximum satisfaction is said to be in 
Equilibrium
90
In case of single commodity equilibrium, consumers are said to be in equilibrium only when
Marginal utility derived from X is the same as price of X
91
what happens when marginal utility of X is more than price of X
When MU of X > P of X, then consumers derives more marginal utility and hence goes on consuming more units of the commodity. As he continues the marginal utility derived from each additional unit goes on decreasing due to LDMU till the time MU become is equals to P. The consumer here attains equilibrium.
92
What happens when MU is less than the price of X
Price of commodity is more than the satisfaction derived from it. so the consumer will reduce consumption of the commodity, due to reversal law of diminishing marginal utility, satisfaction derived from the commodity will increase and consumer will attain equilibrium
93
State the formula for equilibrium in one commodity case
MUx/ MUm = Px
94
State the formula for consumers equilibrium in case of two commodities
MUx/ Px = MUy/ Py
95
Which curve refers to the graphical representation of various alternative combinations of bundles of two goods among which the consumers in different
Indifference curve
96
On the same in difference curve, at what point does the consumers attain maximum satisfaction
Every point on the indifference curve represents same level of satisfaction
97
What are monotonic preferences
Monotonic preferences means that a rational consumer always prefers more of a commodity as it offers him a higher level of satisfaction
98
More of both or more of one and no less of the other is an example of what kind of bundle
Monotonic preference
99
The family of indifference curves that represent consumers preferences over all the bundles of two goods is called
Indifference map
100
The slope of indifference curve is called
Marginal rate of substitution
101
Why is the slope of indifference curve always negative
Because it measures the units to be sacrificed in order to gain one additional unit of another commodity
102
What is the formula for MRS
Units to be sacrificed upon units willing to gain
103
MRS is always a) increasing b) decreasing c) Constant 
b) 
104
Is indifference curve concave or convex
Convex to the origin
105
Why is indifference curve convex
Because of diminishing MRS
106
Why does indifference curve slopes downwards
Because a consumer must consume less of one good to consume more of another good so that total satisfaction remain same
107
Higher indifference curves represent higher levels of satisfaction. True or false
True
108
Can two indifference curves ever intersect each other
no
109
_____ is a graphical representation of all possible combinations of two goods which can be purchased with given income and prices, such that the cost of each of these combinations is equal to the money income of the consumer
budget line
110
____ Is the set of all possible combinations of two goods which can be bought by a consumer’s income and prevailing prices in the market
budget set
111
What is the formula of budget set
M = Pa * Qa + Pb * Qb
112
What is your budget line called
Marginal rate of exchange or price ratio
113
Why is the budget line a downward sloping straight line
Because price ratio between two commodities is always constant, hence the slope of budget line is constant, thus the budget line is a download sloping straight line
114
Why is the budget line downward sloping
inverse relationship between commodity sacrificed and commodities gained
115
What causes shift in budget line
Change in income or change in price of commodity
116
What will happen to Budget line if income of consumer increases
Right word shift
117
What happens to the budget line if income of the consumer decreases
Left word shift
118
What happens to the budget line if price of good X increases
Budget line shift on the X axis towards the left but remains constant at the Y axis
119
What happens to the budget line if commodity why becomes cheaper
The budget line on the Y axis moves upwards what remains the same at the X axis
120
What is the condition for equilibrium in ordinal approach
MRSxy = Px/Py
121
if MRSxy > Px/Py Then what happens
It means that to obtain one more unit of X the consumer is willing to sacrifice more as compared to what is required in the market. It induces the consumers to buy more of X as a result MRS falls and continues to fall till it becomes equal to the ratio of prices and equilibrium is established
122
if MRSxy < Px/Py then what happens
when MRS is less than the price ratio then to gain more units of X the consumer is willing to sacrifice less units of Y than what is required in the market. It induces the consumer to buy less of X and more of Y. as a result MRS rises till it becomes equal to price ratio and equilibrium is established. 
123
when budget line intersects IC, what is it called?
equilibrium
124
____ refers to the quantity of a commodity that a consumer is willing and able to buy, at each possible price during a given period of time
individual demand
125
____ refers to the quantity of a commodity that all consumers are willing and able to buy, at each possible price during a given period of time.
market demand
126
price and quantity demanded have an ____ relationship
inverse
127
substitute goods have a ____ relationship with demand of a commodity
direct
128
complementary goods have a _____ relationship with demand of a given good
inverse
129
demand of a normal good ____ with increase in income
rises
130
demand of inferior goods ____ with rise of income
falls
131
tastes and preference have a ____ direct relationship
direct
132
expectation of price in future has a ____ relationship with demand
direct
133
list all determinants of market demand
1. Price of the given commodity
2. Price of related goods
3. Income of consumers
4. Taste and preferences
5. Expectation of change in price in future
6. Size and composition of population
7. season and weather
8. distribution of income
134
____ Is a tabular statement showing various quantities of a commodity being demanded as areas levels of price, during a given period of time
Demand schedule
135
____ is a graphical representation of demand schedule
Demand curve
136
Which curve is flatter market demand or individual demand?
Market demand
137
Give the formula for slope of demand curve
delta price/ delta quantity
138
Why is the slope of demand curve negative
Due to inverse relationship between price and demand
139
Why is the slope of demand curve negative
Due to inverse relationship between price and demand
139
Why is the slope of demand curve negative
Due to inverse relationship between price and demand
140
Why is the slope of demand curve negative
Due to inverse relationship between price and demand
140
Why is the slope of demand curve negative
Due to inverse relationship between price and demand
141
Which law states the inverse relationship between price and quantity demanded, keeping all other factors constant
Law of demand
142
Law of demand is also known as
First law of purchase
143
What is the other name for other factors constant
ceteris paribus 
144
Is law of demand a qualitative statement or quantitative statement
Qualitative
145
Is law of demand a one-sided law or a two sided law
One-sided law
146
List some exceptions of law of demand
1. giffen goods
2. Status symbol goods
2. Goods of ostentation
3. Fear of shortage
4. ignorance
5. Fashion related goods
6. necessities of life
7. change in weather
147
Special kind of inferior goods on which the consumers spend a large part of their income and their demand rises with an increase in price and demand falls with a decrease in price are called
Giffen goods
148
Who was the pioneer of Giffen goods
Sir Robert Giffin
149
Giffen goods was observed on which commodity
jowar and bajra
150
Explain rise in price with goods of ostentation
Prestige goods like diamond, gold, antique paintings et cetera are bought only due to the prestige they confer upon their possessor. Such goods are demanded only because their prices are very high, if their buy prices were to fall they will no longer be considered as status symbol goods and their demand will decrease
151
What happens to demand in case of fear of shortage
If the consumers expect a shortage of a particular commodity in the near future, then they would start buying more and more of that commodity in the current period even if their prices are rising
152
Explain the effect of rise of price on the Necessities of life
commodities like wheat, salt, medicines are purchased even if their prices increase as they are necessities
153
Change in price of a commodity will lead to movement/shift in demand curve
Movement
154
Change in other factors of a commodity keeping keeping price of commodity constant, will lead to shift/movement along the demand curve?
Shift
155
Downward movement in demand is also known as
Expansion of demand
156
Upward movement along demand curve is also known as
Contraction in demand
157
A rise in price of substitute goods would lead to
Right word shift along the same demand curve
158
Fall in price of complimentary goods would lead to
Right word shift along the same demand curve
159
Which demand refers to the relationship between the demand of a given commodity and the price of related commodities other things remaining constant
Cross demand
160
Is change in weather a part of cross price demand
No
161
Is change in complimentary and substitute goods a part of cross price demand
True
162
Rise in income will result in what type of shift in the demand curve for inferior goods
Leftward shift
163
Which demand refers to the relationship between the price and demand of a commodity assuming other factors constant
Price demand 
164
Which demand refers to relationship between the income of a consumers and the quantity demanded of a commodity assuming all other factors constant
Income demand
165
When two or more goods are demanded simultaneously to satisfy a particular want then demand is called
Joint demand
166
When a commodity can put to several uses, its demand is known as
Composite demand
167
Demand for a commodity which depends on the demand of other goods is known as
Derive demand
168
When a commodity satisfied the want directly, its demand is termed as
Direct demand
169
Which demand can be satisfied by different alternatives
Alternative demand
170
When two goods are close substitutes of each other and increase in demand for one of them will decrease the demand for the other then the demand is any one of them is known as
Competitive demand
171
The concept of elasticity was given bye
Professor Marshall
172
How many types of elasticity are there
Prize elasticity of demand, cross elasticity of demand, income elasticity of demand
173
What is the formula of elasticity of demand
Percentage change in quantity demanded upon percentage change in price
174
What is the formula for elasticity of demand using proportionate method
(delta Q/delta P)* P/Q
175
What are the different degrees of elasticity
Perfectly in elastic, perfectly elastic, highly elastic, highly in elastic, unitary elastic
176
Define perfectly elastic demand
177
Define perfectly in elastic demand
178
Define highly elastic demand
179
Define highly inelastic demand
180
Define perfectly elastic demand
181
Define unitary elastic demand
182
which out of these three is most elastic- comfort commodity, luxury commodity, necessity commodity?
luxury
183
Demand for a commodity with large number of substitutes will be more or less elastic
More elastic
184
Elasticity of demand for any commodity is generally less or more for high income level groups
Less
185
Costly goods like laptop, AC have highly elastic or less elastic demand
Highly elastic demand
186
Commodities whose consumption can be postponed and are not urgent are highly elastic or less elastic
Highly elastic
187
A commodity with several uses will be highly elastic less elastic
highly elastic
188
Demand for commodities that have a greater share of proportion of income of the consumers are more or less elastic
More elastic 
189
For short time period is demand elastic or in elastic
In elastic
190
Why is demand in elastic for shorter time periods
Because people find it difficult to change their habits in a shorter time period
191
Commodities which become habitual necessities for the consumers have less or more elastic demand
Less elastic demand
