Tag: business economics and quantitative methods

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Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Utility may be affected by the presence or absence of.

  1. Substitute Goods

  2. Complementary Goods

  3. Both (a) and (b)

  4. Neither (a) and (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The utility of a good is often dependent on the availability of substitutes (which provide alternatives) and complements (which are used together).

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

A rational consumer is a person who ____________.

  1. behaves at all times, other things being equal, in a judicious manner.

  2. is influenced by persuasive advertising

  3. knows the price of goods in different market and buys the cheapest.

  4. has perfect knowledge of the market.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A rational consumer is considered to be that person who makes rational consumption decisions.

 In other words, the consumer who makes his choices after considering all the other alternative goods (and services) available in the market is called a rational consumer.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

In law of diminishing marginal utility, rationality means __________.

  1. consumer is rational

  2. producer is rational

  3. firm is rational

  4. seller is rational
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In law of diminishing marginal utility, rationality of consumers refer to the situation when consumers take decisions with reason and logic and without any bias.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Law of diminishing marginal utility states that as the consumer buys more units of a commodity _________.

  1. total utility falls

  2. marginal utility falls

  3. average utility falls

  4. both total and marginal utility falls
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Law of diminishing marginal utility states that as consumer will increase its consumption of a commodity, the marginal utility derived from every successive unit of consumption will decrease and a situation may come when marginal utility is zero or negative. 

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Name the economists who developed:
Marginal utility theory - __________, and
Indifference curve theory - ________.

  1. Marshall; Hicks

  2. Hicks; Marshall

  3. Marshall; Samuelson

  4. Robbins: Hicks
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  • 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. 
Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Which assumption implies the consumer aims at utility maximisation?

  1. Rationality

  2. Ordinality

  3. Cardinality

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

Rationality of consumers refer to the situation when consumers take decisions with reason and logic and without any kind of bias. When the consumer takes rational decision they try to get highest satisfaction by spending least amount of money.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

An assumption of the constant marginal utility of money means the importance of money to the consumer is _________.

  1. rising

  2. falling

  3. unchanged

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

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. 

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Which assumption of consumer theory states that if the consumer prefers A to B, then he will not prefer B to A in another time period?

  1. Transitivity

  2. Preference

  3. Rationality

  4. Consistency
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to the consistency theory, consumer will not change his preferences in another time period. So if he prefers commodity A over commodity B then he will never prefer B over A. It is one of the assumption of ordinal utility theory analysis.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Law of diminishing marginal utility states that when more and more units of a commodity are consumed, marginal utility ___________.

  1. begins to increase

  2. remains constant

  3. begins to decrease

  4. becomes zero
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Law of diminishing marginal utility states that as consumer will increase its consumption of a commodity, the marginal utility derived from every successive unit of consumption will decrease and a situation may come when marginal utility becomes zero or negative.