Economics MCQ Questions and Solutions with Explanations | Commerce

Passive factor of production is both Land & Capital.

Under law of demand Price of commodity is an independent variable, Quantity demanded is a dependent variable and Reciprocal relationship is found between price and quantity demanded.

For inferior commodities, income effect is Negative. When price of an inferior good falls, its negative income effect will tend to reduce the quantity purchased, while the substitution effect will tend to increase the quantity purchased.

Mixed economy means an economy where there is co-existence of public sector along with private sector. All modern economies are mixed where the means of production are shared between the private and public sectors. Also called dual economy.

When total utility becomes maximum, then marginal utility will be Zero. It is based in the law of diminishing marginal utility which says 'as more and more units of a good are consumed, MU i.e level of satisfaction derived from each successive unit goes on falling because desire for that commodity tend to fall.

Utility means power to satisfy a want. It is a quality possessed by a commodity or service to satisfy human wants. Utility can also be defined as value-in-use of a commodity because the satisfaction which we get from the consumption of a commodity is its value-in-use.

Marginal utility is equal to average utility at that time when average utility is maximum.

Preparation of the plan is the task of the Planning Commission. The Planning Commission is charged with the responsibility of making assessment of all resources in the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities.

At the point of satiety, marginal utility is zero.

Marginal utility refers to the additional satisfaction or benefit gained from consuming one more unit of a good or service. The point of satiety is the stage where a consumer has consumed enough of a product, and any additional consumption does not add any further satisfaction or utility. Therefore, at this point, the marginal utility becomes zero.

Option B: Positive
This option is incorrect because if marginal utility were positive, it would imply that additional consumption still provides some level of increased satisfaction, which is not the case at the point of satiety.

Option C: Maximum
This option is incorrect because marginal utility is not at its maximum at the point of satiety. Marginal utility reaches its maximum before reaching the point of satiety, when each additional unit consumed provides decreasing satisfaction until it reaches zero.

Option D: Negative
This option is incorrect because negative marginal utility would imply that additional consumption decreases overall satisfaction, which occurs after the point of satiety, not at it.

Example of correct usage:
When a person has had enough water to drink, the marginal utility of an additional glass of water becomes zero, indicating they have reached the point of satiety. Any further consumption would not increase their satisfaction.

Understanding marginal utility helps in analyzing consumer behavior and preferences, particularly in determining the optimal consumption level of goods and services.

Total utility of a commodity is measured by value in use price of that commodity. The utility theory of value was the belief that price and value were solely based on how much “use” an individual received from a commodity.