Economics · Commerce Accountancy

Microeconomics and Pricing

1,413 Questions

Microeconomics and pricing analyze market structures, consumer utility, marginal cost, and strategic pricing models like predatory pricing. These foundational economic concepts are regularly featured in civil services and state administrative examinations. Solve these practice questions to understand market equilibrium, demand elasticity, and competitive firm behavior.

Market equilibrium pricingIncome elasticity of demandMarginal cost conceptsUtility functions analysisPredatory pricing strategiesOligopoly market structures

Microeconomics and Pricing Questions

Multiple choice economics theories of distribution unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

When aggregate demand exceeds aggregate supply or when investment is greater than savings, _____________ will increase.

  1. price

  2. income

  3. savings

  4. all of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When aggregate demand is more than aggregate supply or when investment is more than saving in the economy , then the planned inventory would fall below the desired level. To bring back the Inventory at the desired level, the producers will expand the output. Therefore, as a result of more output in the economy, the income will increase. 

Multiple choice economics income determination unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

The gap by which actual aggregate demand exceeds the aggregate supply required to establish full employment equilibrium is known as ______.

  1. Deficient Demand

  2. Deflationary gap

  3. Inflationary Gap

  4. Excess Demand
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Inflationary gap is the excess of aggregate demand over and above its level required to maintain full employment equilibrium in the economy. It implies two things-
1) Planned aggregate demand in the economy happens to exceed its full employment level.
2) The level of aggregate demand surpasses the level of aggregate supply even when the available factors are fully utilized.
Multiple choice economics income determination unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Effective demand is determined at the point of equality between aggregate demand and aggregate supply. 

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The point at which aggregate demand (AD)  is equals aggregate supply (AS) is the point of effective demand  because at this level there is no tendency for income and output to change and the market is entirely clear.

Multiple choice economics income determination unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

If aggregate demand exceeds aggregate supply, the income rises. 

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

True.

When Aggregate demand  is more than Aggregate supply, then the planned inventory would fall below the desired level. To bring back the Inventory at the desired level, the producers expand the output More output means more income. Rise in output means rise in AS and rise in income means rise in AD. 

Multiple choice economics income-output determination unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

_____ refers to that period in which supply of a commodity cannot be increased beyond its existing stock even if the demand has increased.

  1. Very short period

  2. Short period

  3. Long period

  4. Very long period
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In the very short period, supply is perfectly inelastic because the time frame is too brief to adjust production levels or bring in new resources, meaning supply is limited to existing stock.

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Deficiency in demand has no effect on the country's output and prices.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Deficiency in demand causes deflation. Deflation refers to the reduction of the general level of prices in an economy. Thus, deficient demand has effect on the country's output and prices.

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Increase in margin requirements helps to control the situation of deficient demand.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Margin requirements needs to be reduced to enhance the credit creating power of commercial banks and to correct the deficient demand.

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

When aggregate demand is greater than aggregate supply, inventories: 

  1. Fall

  2. Rise

  3. Do not change

  4. First fag, then rise
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When Aggregate demand  is more than Aggregate supply, then the planned inventory would fall below the desired level as the demand is more than the supply in the market. To bring back the Inventory at the desired level, the producers expand the output More output means more income. Rise in output means rise in AS and rise in income means rise in AD. 

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Aggregate demand function represents a ________ relationship between the level of output and employment and the aggregate demand price.

  1. positive

  2. negative

  3. constant

  4. non-linear
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Aggregate demand function represents the relation between the level of out produced in an economy to the level of employment in the economy and aggregate demand price where the level of output and level of employment has a direct relationship due to which if one increases then the other one also increases and vice versa as employees directly contribute in the production of output and level of output and demand price have an inverse relationship as level of output increases in the economy then the aggregate demand price decreases due to demand deficiency and vice versa.

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Aggregate demand function is represented by a downward sloping curve.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

False.

AD curve is upward sloping owing to increasing income in the economy. As the income increases, the expenditure by the people also increases which leads to rising AD and vice versa. Therefore, income and AD has a positive relationship between them due to which AD curve is upward sloping. 

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Aggregate supply curve becomes a ____________, after the full employment level has been achieved in the economy.

  1. vertical line

  2. downward sloping curve

  3. horizontal line

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Aggregate supply refers to the desired level of output in the economy during an accounting year. It is through this output only that the producer sector generates income. Aggregate supply function is a upward sloping curve which denotes the direct relation between the level of output produced in the economy and income generates. The curve become vertical after full employment level of output indicating the maximum amount of output which can be produced in the economy generating the respective national income. 

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

The aggregate demand curve intercepts on the _________.

  1. Y-axis

  2. X-axis

  3. point of origin

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Aggregate Demand refers to the desired level of expenditure in the economy during an accounting year. It is what people wish to spend on the purchase of goods and services during an accounting year.

Aggregate demand= C+I+G+ (X-M) where

C= Consumption expenditure

I= Investment expenditure

G= Government expenditure

(X-M)= Net export

Aggregate demand curve is upward sloping showing a positive relation between level of income and overall expenditure in the economy. The curve intercepts on Y-axis because even at zero level of income, there is some consumption which is required for the very existence of life. 

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

The aggregate supply function starts from the origin.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Aggregate supply refers to the desired level of output in the economy during an accounting year. It is through this output only that the producer sector generates income. Aggregate supply function is a upward sloping curve which denotes the direct relation between the level of output produced in the economy and income generates. The curve starts from the origin indicating the income at zero level of output in the economy. 

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Aggregate supply function is a ___________ curve.

  1. upward sloping

  2. horizontal curve, followed by a upward sloping

  3. downward sloping

  4. upward sloping curve at first, followed by a vertical
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Aggregate supply refers to the desired level of output in the economy during an accounting year. It is through this output only that the producer sector generates income. Aggregate supply function is a upward sloping curve which denotes the direct relation between the level of output produced in the economy and income generates. The curve become vertical after full employment level of output indicating the maximum amount of output which can be produced in the economy generating the respective national income. 

Multiple choice economics concept of excess demand and deficient demand unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Aggregate supply function becomes parallel to the Y-axis, after the full employment level has been achieved in the economy.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Aggregate supply refers to the desired level of output in the economy during an accounting year. It is through this output only that the producer sector generates income. Aggregate supply function is a upward sloping curve which denotes the direct relation between the level of output produced in the economy and income generates. The curve become vertical i.e. parallel to Y-axis after full employment level of output indicating the maximum amount of output which can be produced in the economy generating the respective national income.