Economics Questions (MCQs) for Competitive Examinations

Notes:
Microeconomic variables are those patterns or elements that can be used to describe the behavior of a person or an individual economic unit, like a business. Eg. Consumer’s Equilibrium.

Notes:
In economics, specifically general equilibrium theory, a perfect market is defined by several idealizing conditions, collectively called perfect competition.

Notes:
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.

Notes:
Gresham’s law states that bad money drives out good. For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will gradually disappear from circulation.
The law holds that bad money drives out good money in circulation. Bad money is then the currency that is considered to have equal or less value compared to its face value. Meanwhile, good money is currency that is believed to have greater value or more potential for greater value than its face value. Logically, consumers will choose to use bad money over good money because good money has the potential to be worth more than its face value.

Notes:
The demand curve is the graphical representation of the relationship between the quantity demanded of a commodity and its prices. It is downward sloping from left to right because of the law of diminishing marginal utility, income effect, and price effect.

Notes:
Price elasticity = 0,  Perfectly inelastic-  Demand does not change as price changes
Price elasticity < 1, less than unit elastic-  % change in demand is less than that in price
Price elasticity = 1, Unit elastic –  % change in demand is equal that in price
Price elasticity > 1, more than unit elastic – % change in demand is more than that in price
Price elasticity = ∞ ,  Perfectly elastic Demand changes infinitely

Notes:
The supply curve reflects the relationship between the price and quantity supplied graphically. It is a positively sloped curve. It becomes flatter in the long run as price becomes constant after a certain time.

Notes:
Marginal Utility is the additional utility derived from the consumption of an additional unit of commodity. It quantifies the added satisfaction that a consumer garners from consuming additional units of goods or services. 

Notes:
Total Utility is the sum of all the utilities derived from the consumption of all the units of a particular commodity. So when the marginal utility decreases total utility increases and is maximum when marginal utility is 0.

Notes:
The purchasing power of a person is the reason for his limited spending. He has budget constraints which inturn affect the market as a whole. The budget constraint is used to analyze consumers choices.