Economics - Study Mode

[#231] If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to
Correct Answer

(A) Increase

Explanation

Solution: If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to increase. Raising prices will always cause total revenue to increase.

[#232] The horizontal demand curve parallel to x-axis implies that the elasticity of demand is
Correct Answer

(B) Infinite

Explanation

Solution: The horizontal demand curve parallel to x-axis implies that the elasticity of demand is infinite.It is zero when the demand curve is parallel to the y-axis.

[#233] An individual demand curve slopes downward to the right because of the
Correct Answer

(D) All of the above

Explanation

Solution: An individual demand curve slopes downward to the right because of the Working of the law of diminishing marginal utility, Substitution effect of decrease in price and Income effect of fall in price.

[#234] Income elasticity of demand is defined as the responsiveness of
Correct Answer

(A) Quantity demanded to a change in income

Explanation

Solution: Income Elasticity of Demand (YED) is defined as the responsiveness of demand when a consumer's income changes. It is defined as the ratio of the change in quantity demand over the change in income. The higher the income elasticity, the more sensitive demand for a good is to changes in income.

[#235] The supply of a good refers to
Correct Answer

(D) Quantity of the good offered for sale at a particular price per unit of time

Explanation

Solution: The supply of a good refers to quantity of the good offered for sale at a particular price per unit of time. The term supply refers to the entire relationship between the quantity supplied and the price of a good.