Tag: government budget and economy

Quizzes (6) Questions (228)

Questions Related to government budget and economy

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Given the money income and the price, the line which shows all different combinations of two goods that a consumer can buy by spending all his income is called __________.

  1. production line

  2. budget line

  3. iso-cost line

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The budget line represents all combinations of two goods that a consumer can afford given their income and the prices of the goods.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

A shift in the budget line, when prices are constant, is due to:

  1. change in demand

  2. change in income

  3. change in preferences

  4. change in utility
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A budget line represents all combinations of goods a consumer can afford given their income and prices. If prices remain constant, a change in the consumer's income shifts the budget line outward (if income increases) or inward (if income decreases).

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Slope of budget line is Indicated by:

  1. $\displaystyle \frac{P _X}{P _Y}$

  2. $\displaystyle \frac{P _Y}{P _X}$

  3. $P _X = P _Y$

  4. all of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The slope of the budget line is determined by the ratio of the prices of the two goods. It represents the rate at which the market allows a consumer to trade one good for another.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

When price of Good-Y (shown on Y-axis) rises:

  1. price line shifts to the right

  2. price line shifts to the left

  3. price line rotates to the right

  4. price line rotates to the left
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When the price of Good-Y rises, the consumer can afford less of it, causing the Y-intercept of the budget line to move closer to the origin. This results in the budget line rotating inward toward the origin, which is described as rotating to the left.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Any point above the consumer's equilibrium point is desirable but is not attainable because ________.

  1. income and prices are given

  2. taste and income and given

  3. preference and prices are given

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

Points outside the budget line are unattainable because they exceed the consumer's total budget. The budget is defined by the consumer's income and the market prices of the goods.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

In indifference curve theory, price effect is split into which two effects?

  1. Price effect and output effect

  2. Price effect and substitution effect

  3. Price effect and income effect

  4. Substitution effect and income effect
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The price effect describes the total change in consumption due to a price change. It is decomposed into the substitution effect (change due to relative price changes) and the income effect (change due to change in real purchasing power).