Economics Questions (MCQs) for Competitive Examinations
Economics Multiple Choice Questions (MCQs) for General Studies and GK preparation of SSC, NDA, CDS, UPSC, UPPSC and State PSC Examinations.
11. Which of the following is represented by ‘Lorenz Curve’?
[A] Inflation
[B] Income Distribution
[C] Employment
[D] Deflation
Show Answer
Correct Answer: B [Income Distribution]
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.
12. Which of the following is related to Microeconomics?
[A] The size of national economy
[B] Inflation
[C] Unemployment
[D] Behaviour of individual economic units
Show Answer
Correct Answer: D [Behaviour of individual economic units]
Notes:
Micro Economics is that branch of economics which deals with the behaviour of individual economic units of the economy such as individual households, individual firms or industry. It revolves around the determination of prices of individual commodities and factors.
13. What is the demand of a commodity?
[A] Need of the commodity
[B] Desire for a commodity
[C] Quantity of a commodity demanded at a particular time at a particular price
[D] Amount of commodity demanded
Show Answer
Correct Answer: C [Quantity of a commodity demanded at a particular time at a particular price]
Notes:
Demand for a commodity refers to the quantity of a commodity that a consumer’s desire to purchase goods and services and a willingness to pay a price for a specific good or service. Demand and supply are the basic factors that run the economy.
14. Which of the following is correct regarding the law of demand?
[A] It is relationship between Income and price of commodity
[B] Assumes Income of customer should not change
[C] Assumes Price of the commodity should not change
[D] It is relationship between Income and Quantity demanded
Show Answer
Correct Answer: B [Assumes Income of customer should not change]
Notes:
Law of demand states that things like customer’s income, taste, and preference, Price of substitutes remaining unchanged, quantity demanded of a commodity is inversely related to the price of a commodity.
15. What does low price elasticity of demand for a commodity show?
[A] Necessity of good
[B] It is luxury good
[C] It doesn’t have importance
[D] It is inferior good
Show Answer
Correct Answer: A [Necessity of good]
Notes:
Price Elasticity is the measure of the degree of responsiveness of demand for a commodity to change in its price. That means the low price elasticity is demand doesn’t change with the price. These are the necessary goods.
16. What is perfectly inelastic demand?
[A] Demand doesn’t change with price
[B] Demand change with price
[C] Change in demand is equal to price
[D] Demand changes infinitely
Show Answer
Correct Answer: A [Demand doesn’t change with price]
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
17. Which of the following is the basis for the law of demand?
[A] Diminishing marginal utility
[B] Demand and supply relation
[C] Total utility of a good
[D] None of the above
Show Answer
Correct Answer: A [Diminishing marginal utility]
Notes:
The law of demand which states that quantity demanded of a commodity is inversely related to the price of a commodity the demand of good and the price. This is based on the law of diminishing marginal utility. This is because Marginal utility affects the demand of the good.
18. What restricts the spending of a person in a market?
[A] Marginal Utility
[B] Purchasing power
[C] Demand curve
[D] None of the above
Show Answer
Correct Answer: B [Purchasing power]
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.
19. What is Market equilibrium?
[A] Quantity demanded greater than quantity supplied
[B] Quantity demanded less than quantity supplied
[C] Quantity demanded equal to quantity supplied
[D] Quantity demanded is same as quantity produced
Show Answer
Correct Answer: C [Quantity demanded equal to quantity supplied]
Notes:
Market equilibrium is defined by equality between quantity demanded and quantity supplied in the market. The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market.
20. What defines a market place in an economy?
[A] Place where profits are made
[B] Place where goods are made
[C] Place where people meet
[D] Place where buyers meet sellers
Show Answer
Correct Answer: D [Place where buyers meet sellers]
Notes:
A market is a place where forces of demand and supply operate and where buyers and sellers interact to trade goods, services, or contracts or instruments for money or barter.
