Economics MCQ Questions and Solutions with Explanations | Commerce

The capital that is consumed by an economy or a firm in the production process is known as Depreciation. In economics, depreciation is the gradual decrease in the economic value of the capital stock of a firm, nation or other entity, either through physical depreciation, obsolescence or changes in the demand for the services of the capital in question.

Haberler propounded the opportunity cost theory of international trade. Gottfried Haberler has attempted to restate the comparative costs in terms of opportunity cost. He demonstrates that the doctrine of comparative costs can hold valid even if the labour theory of value is discarded. The theory determines the cost of producing a commodity in terms of the alternative production that has to be foregone for producing the commodity in question.

Option B is incorrect. When two linear demand curves intersect each other, they have the same price and quantity at the point of intersection. However, their slopes may be different. Since price elasticity of demand depends on both the slope of the demand curve and the price-quantity relationship, the coefficient of elasticity need not be the same on both demand curves.

Option A is correct: A linear demand curve can depict different degrees of price elasticity, ranging from elastic to unitary elastic to inelastic at different points. The limiting cases of perfectly elastic and perfectly inelastic demand are also represented conceptually by horizontal and vertical demand curves.

Option C is correct: Two parallel linear demand curves have the same slope, but at a particular price they can have different quantities demanded. Since elasticity depends on the price-to-quantity relationship as well as the slope, the coefficient of elasticity can be different for the two curves.

Option D is correct: Price elasticity of demand measures the relative (percentage) change in quantity demanded in response to the relative (percentage) change in price, rather than absolute changes.

Therefore, the incorrect statement is Option B.

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.

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.

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.

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.

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.

The cost of one thing in terms of the alternative given up is called Opportunity cost. Opportunity cost is an economics term that refers to the value of what you have to give up in order to choose something else.

We can conclude with certaintty that the equilibrium quantity will decrease.