Economics Concepts and Theories

Production possibility frontier explain the law of diminishing marginal returns as with the consumption of every additional unit of one good ,the consumer is willing to sacrifice much less and less ,in two-commodity case.That is why the production possibility curve is concave to the origin.

Law of marginal does not hold true in case of readers, misers and hobbies as the consumption increases the marginal utility derived from the each successive units tends to rise. For example, if a person's hobby is to collect stamps, then the marginal utility derived by collecting one more unit of stamp will rise.

According to the concept of ordinal utility approach, it is impossible to measure utility in absolute terms and thus it cannot be compared. The reason for it being that it is a psychological phenomena. However, according to the ordinal utility theorists, a consumer can rank various combinations of goods and services according to his preference. 

• Alfred Marshall was a British economist who developed most of the modern economic theory including utility analysis.
  
• John Hicks was a British economist who criticized the utility theory and developed a newer theory on consumer behaviour known as the indifference curve theory. 
  

Constant marginal utility of money means that the utility per unit of money remains unchanged for the consumer. This implies that each additional unit of money provides the consumer with the same level of satisfaction. This leads to the use of money as the measuring rod in utility analysis. 

Hermann Heinrich Gossen was a Prussian economist who propounded the law of equilibrium marginal utility.
The law of equilibrium marginal utility states that the consumer will distribute his money income between the goods in such a way that the utility derived from the last rupee spend on each good is equal. In other words, consumer is in equilibrium position when marginal utility of  money expenditure on each goods is the same.

The rent theory was developed by an American economist,Francis L Walker.
He states that profit is the rent of ability.
Entrepreneurs of superior ability earns profit just as superior land earns rent.

Risk theory was coined by FB Hawley who states that risk taking as the main function of an entrepreneur

The closed economy is that economy in which neither imports nor exports take place in that particular country. As the name suggests the country provides the consumers with everything they need from within the country’s economy.

A closed economy is one that has no trading action with the external economy. The closed economy is independent, which means no import comes into the country and no exports depart the country. The reason for a closed economy is to provide household consumers with everything they need from within the country's limits.

A closed-household financial system is a society's economic system in which goods are not traded. As an alternative, those goods are shaped and extreme by the same households.

Thus, the correct option is A.

In the Keynesian model, aggregate demand is the primary driver of output and income in the short run because prices and wages are assumed to be sticky.

In a two sector economy, the household sector renders factor services and is in return rewarded with factor payments by the firms in the form of rent, wages, interest and profits.

A country that undertakes trade with other countries is termed as an open economy. The open economy is characterised with four sectors, namely, firms, households, government and the foreign sector.

Aggregate demand refers to the demand for the final output in the economy, which all the buyers in the economy desire to purchase, backed by sufficient purchasing power at the general price level and the employment level in the economy.