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 called GDP Deflator?
[A] Ratio of nominal to real GNP
[B] Ratio of nominal to real CPI
[C] Ratio of real to nominal GNP
[D] Ratio of nominal to real GDP
Show Answer
Correct Answer: D [Ratio of nominal to real GDP]
Notes:
The GDP deflator is a measure of price inflation. It is calculated by dividing Nominal GDP by Real GDP and then multiplying by 100. Nominal GDP is the market value of goods and services produced in an economy, unadjusted for inflation
13. 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.
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. Which among the following is related to the demand curve?
[A] Relation between quantity demanded and price of a commodity
[B] Relation between supply and demand of a commodity
[C] Relation between income of customer and demand of commodity
[D] None of the above
Show Answer
Correct Answer: A [Relation between quantity demanded and price of a commodity]
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.
16. Which among the following is an example of substitute goods?
[A] Milk and Coffee
[B] Pen and Paper
[C] Ink and Pen
[D] Tea and coffee
Show Answer
Correct Answer: D [Tea and coffee]
Notes:
Substitution Effect refers to the substitution of the commodity in place of other commodity when it becomes relatively cheaper. In the given question if the price of Coffee increases, Tea can replace it.
17. Which of the below is a correct statement regarding inferior goods?
[A] Demand of a good decreases with increases in peoples income
[B] Demand of a good increases with increases in peoples income
[C] Demand of a good decreases with decrease in peoples income
[D] Demand of a good increase with decrease in peoples income
Show Answer
Correct Answer: A [Demand of a good decreases with increases in peoples income]
Notes:
An inferior good is an economic term that describes a good whose demand drops when people’s incomes rise. This occurs when a good has more costly substitutes that see an increase in demand as incomes and the economy improve. Inferior goods are the opposite of normal goods where in normal goods, a consumer would demand less of if they had a higher level of real income.
18. Which among the following is related to utility?
[A] Satisfaction and wants
[B] Necessity and wants
[C] Usefulness and need
[D] None of the above
Show Answer
Correct Answer: A [Satisfaction and wants]
Notes:
Utility is the power or capacity of a commodity to satisfy a human want or it is the amount of satisfaction that a person gets from the consumption of a good or service. It is measured in utils.
19. What does marginal utility in economics signify?
[A] Small utility
[B] Additional utility
[C] Minimum utility
[D] Satisfied utility
Show Answer
Correct Answer: B [Additional utility]
Notes:
Marginal utility refers to the extra satisfaction or benefit gained from consuming one additional unit of a good or service. In other words, it measures the added utility derived from the next unit consumed.
20. In which of the following circumstances, the total utility is maximum?
[A] Marginal utility is maximum
[B] Marginal utility = 0
[C] Marginal utility is minimum
[D] None of the above
Show Answer
Correct Answer: B [Marginal utility = 0]
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.
