Question : An increase in the price of a good will lead to:
Option 1: A leftward shift of the budget line
Option 2: A rightward shift of the budget line
Option 3: No change in the budget line
Option 4: Changes in consumer preferences
Correct Answer: A leftward shift of the budget line
Solution : The correct answer is (a) A leftward shift of the budget line.
When the price of a good increases, it reduces the purchasing power of the consumer's income for that particular good. As a result, the consumer can afford to purchase a lesser quantity of the good at the given income level. This change in affordability is reflected in the budget line.
The budget line represents the different combinations of goods that a consumer can afford given their income and the prices of the goods. When the price of a good increases, the consumer's ability to purchase that good decreases. This leads to a leftward shift of the budget line, indicating that the consumer can now afford fewer quantities of the good at the same income level.
Question : The concept of the budget line is based on:
Option 1: Consumer preferences
Option 2: Consumer income
Option 3: Consumer prices
Option 4: All of the above
Question : An increase in demand could result from:
Option 1: Increase in price of the substitutes
Option 2: Decrease in price of the complementary good
Option 3: Increase in income of the consumer
Option 4: All of these
Question : Statement 1: A decrease in government regulations will lead to a rightward shift in the aggregate supply curve.
Statement 2: An increase in consumer savings will lead to a leftward shift in the aggregate demand curve.
Which statement is correct?
Option 1: Only Statement 1
Option 2: Only Statement 2
Option 3: Both Statement 1 and Statement 2
Option 4: Neither Statement 1 nor Statement 2
Question : When there is a growth of resources, a concave "production possibility curve" will:
Option 1: shift leftward
Option 2: shift rightward
Option 3: become straight
Option 4: become convex
Question : Statement 1: An increase in government spending will lead to a rightward shift in the aggregate demand curve.
Statement 2: An increase in aggregate supply will lead to a decrease in the price level.
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