MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO RELATION BETWEEN INCOME AND VALUE

Which of the following is the best description of “Value” in the context of economics?

A) The cost price of a product
B) The satisfaction received from consuming a product
C) The income generated from selling a product
D) The amount of money needed to produce a product
Answer: B) The satisfaction received from consuming a product

How does an increase in income generally affect consumer demand for normal goods in India?

A) Demand decreases
B) Demand remains unchanged
C) Demand increases
D) Demand fluctuates randomly
Answer: C) Demand increases

Which of the following best explains the concept of “Marginal Utility”?

A) Total satisfaction from all units of a good consumed
B) The increase in total satisfaction from consuming an additional unit of a good
C) The total cost of producing an additional unit of a good
D) The difference between total revenue and total cost
Answer: B) The increase in total satisfaction from consuming an additional unit of a good

In India, which sector’s income growth has been most closely associated with increased consumer spending on durable goods?

A) Agriculture
B) Manufacturing
C) Services
D) Mining
Answer: C) Services

What is the likely impact on the value perception of a product if the disposable income of consumers increases?

A) Value perception decreases
B) Value perception remains the same
C) Value perception increases
D) Value perception becomes negative
Answer: C) Value perception increases

Which economic theory explains the relationship between income and the quantity of goods demanded?

A) Law of Supply
B) Law of Diminishing Returns
C) Law of Demand
D) Law of Opportunity Cost
Answer: C) Law of Demand

In India, what is the primary measure used to determine the value of goods and services produced within a country?

A) Gross Domestic Product (GDP)
B) Net National Product (NNP)
C) Gross National Income (GNI)
D) Consumer Price Index (CPI)
Answer: A) Gross Domestic Product (GDP)

What is the effect of inflation on the real income of consumers in India?

A) Real income increases
B) Real income remains the same
C) Real income decreases
D) Real income fluctuates unpredictably
Answer: C) Real income decreases

Which of the following best describes the “Engel Curve”?

A) A graph showing the relationship between the price of a good and the quantity demanded
B) A graph showing the relationship between a consumer’s income and the quantity demanded of a good
C) A graph showing the relationship between the supply and demand of a good
D) A graph showing the relationship between the cost of production and the price of a good
Answer: B) A graph showing the relationship between a consumer’s income and the quantity demanded of a good

What happens to the demand for inferior goods in India as consumer income rises?

A) Demand increases
B) Demand remains unchanged
C) Demand decreases
D) Demand becomes zero
Answer: C) Demand decreases

Which concept explains the additional satisfaction a consumer gets from consuming one more unit of a good?

A) Total Utility
B) Marginal Utility
C) Average Utility
D) Opportunity Cost
Answer: B) Marginal Utility

How is the elasticity of demand for luxury goods generally characterized?

A) Perfectly Inelastic
B) Inelastic
C) Unit Elastic
D) Elastic
Answer: D) Elastic

Which sector in India typically sees an increase in demand for its products as urbanization increases?

A) Agriculture
B) Construction
C) Forestry
D) Fishing
Answer: B) Construction

Which economic indicator best reflects the standard of living in a country?

A) Gross National Product (GNP)
B) Gross Domestic Product (GDP) per capita
C) Net National Product (NNP)
D) Consumer Price Index (CPI)
Answer: B) Gross Domestic Product (GDP) per capita

When consumer incomes rise, which of the following is most likely to happen to the demand for normal goods?

A) It increases.
B) It decreases.
C) It stays the same.
D) It fluctuates unpredictably.
Answer: A) It increases.

What term is used to describe goods for which demand increases as income increases?

A) Inferior Goods
B) Normal Goods
C) Giffen Goods
D) Complementary Goods
Answer: B) Normal Goods

In economic terms, what does the term “real income” refer to?

A) Nominal income adjusted for taxes
B) Nominal income adjusted for inflation
C) Total earnings before taxes
D) Total earnings after taxes
Answer: B) Nominal income adjusted for inflation

Which of the following measures the responsiveness of quantity demanded to a change in income?

A) Price Elasticity of Demand
B) Cross Elasticity of Demand
C) Income Elasticity of Demand
D) Supply Elasticity
Answer: C) Income Elasticity of Demand

What happens to the quantity demanded of a good if it is an inferior good and consumer income increases?

A) Quantity demanded increases
B) Quantity demanded decreases
C) Quantity demanded stays the same
D) Quantity demanded fluctuates randomly
Answer: B) Quantity demanded decreases

Which of the following statements is true about consumer preferences in India as incomes rise?

A) Consumers prefer to buy more inferior goods.
B) Consumers prefer to buy more normal and luxury goods.
C) Consumers reduce their spending on all types of goods.
D) Consumers’ preferences do not change with income.
Answer: B) Consumers prefer to buy more normal and luxury goods.

What is the primary factor that determines the value a consumer places on a good?

A) The production cost of the good
B) The price of the good
C) The utility derived from the good
D) The availability of the good
Answer: C) The utility derived from the good

Which of the following is an example of a luxury good in the Indian context?

A) Basic food grains
B) Public transportation
C) Designer clothing
D) Generic medicines
Answer: C) Designer clothing

If the income elasticity of demand for a good is greater than 1, how is this good classified?

A) Inferior Good
B) Normal Good
C) Luxury Good
D) Necessity Good
Answer: C) Luxury Good

What happens to the supply curve if the income of consumers increases, assuming the good is a normal good?

A) It shifts to the right
B) It shifts to the left
C) It remains unchanged
D) It becomes vertical
Answer: C) It remains unchanged

Which index measures the average change in prices over time that consumers pay for a basket of goods and services?

A) Producer Price Index (PPI)
B) Wholesale Price Index (WPI)
C) Consumer Price Index (CPI)
D) Retail Price Index (RPI)
Answer: C) Consumer Price Index (CPI)

In which type of market structure is the relationship between income and value most directly observable through changes in demand?

A) Perfect Competition
B) Monopolistic Competition
C) Oligopoly
D) Monopoly
Answer: A) Perfect Competition

What is the effect of a decrease in income tax rates on disposable income?

A) Disposable income decreases
B) Disposable income remains unchanged
C) Disposable income increases
D) Disposable income fluctuates
Answer: C) Disposable income increases

Which of the following best describes a “Giffen Good”?

A) A good for which demand increases as its price increases
B) A good for which demand decreases as income increases
C) A good for which supply increases as income increases
D) A good for which supply decreases as price increases
Answer: A) A good for which demand increases as its price increases

How does the substitution effect influence consumer choices when incomes rise?

A) Consumers substitute more expensive goods for cheaper ones.
B) Consumers substitute cheaper goods for more expensive ones.
C) Consumers buy the same goods in larger quantities.
D) Consumers’ choices remain unaffected.
Answer: A) Consumers substitute more expensive goods for cheaper ones.

Which factor is least likely to influence the relationship between income and demand for goods in India?

A) Consumer preferences
B) Production technology
C) Price of related goods
D) Advertising
Answer: B) Production technology

What is the term for goods that have a direct relationship between price and quantity demanded due to prestige or status?

A) Normal Goods
B) Inferior Goods
C) Veblen Goods
D) Giffen Goods
Answer: C) Veblen Goods

What impact does an increase in disposable income generally have on the savings rate in India?

A) Savings rate decreases
B) Savings rate remains unchanged
C) Savings rate increases
D) Savings rate fluctuates unpredictably
Answer: C) Savings rate increases

In India, which type of goods typically sees the most significant change in demand as income levels increase?

A) Necessities
B) Luxuries
C) Inferior goods
D) Commodities
Answer: B) Luxuries

Which measure is commonly used to assess the value added at each stage of production in an economy?

A) Gross Domestic Product (GDP)
B) Value Added Tax (VAT)
C) Producer Price Index (PPI)
D) Gross National Income (GNI)
Answer: B) Value Added Tax (VAT)

What is the likely effect on consumer spending in India if the government increases social welfare payments?

A) Consumer spending decreases
B) Consumer spending remains unchanged
C) Consumer spending increases
D) Consumer spending fluctuates unpredictably
Answer: C) Consumer spending increases

Which economic theory suggests that as people’s incomes increase, their spending on inferior goods decreases?

A) Keynesian Theory
B) Classical Theory
C) Engel’s Law
D) Malthusian Theory
Answer: C) Engel’s Law

What term describes the percentage of income that is spent on consumption?

A) Marginal Propensity to Consume (MPC)
B) Marginal Propensity to Save (MPS)
C) Average Propensity to Consume (APC)
D) Average Propensity to Save (APS)
Answer: C) Average Propensity to Consume (APC)

In the context of India, which type of tax is directly proportional to income levels?

A) Regressive Tax
B) Proportional Tax
C) Progressive Tax
D) Flat Tax
Answer: C) Progressive Tax

How does inflation affect the real value of fixed incomes in India?

A) Real value increases
B) Real value remains unchanged
C) Real value decreases
D) Real value fluctuates unpredictably
Answer: C) Real value decreases

What is the relationship between income inequality and the Gini coefficient?

A) Direct relationship
B) Inverse relationship
C) No relationship
D) Random relationship
Answer: A) Direct relationship

Which sector in India is most sensitive to changes in consumer income?

A) Agriculture
B) Manufacturing
C) Services
D) Information Technology
Answer: C) Services

What effect does an increase in consumer confidence typically have on spending and saving?

A) Increases spending, decreases saving
B) Increases both spending and saving
C) Decreases spending, increases saving
D) Decreases both spending and saving
Answer: A) Increases spending, decreases saving

Which of the following best describes disposable income?

A) Gross income before taxes
B) Net income after taxes and mandatory charges
C) Income used for savings only
D) Income used for investments only
Answer: B) Net income after taxes and mandatory charges

What is the impact of a fall in income on the demand for essential goods?

A) Demand increases significantly
B) Demand decreases significantly
C) Demand remains relatively stable
D) Demand becomes zero
Answer: C) Demand remains relatively stable

Which policy is most likely to increase consumer income directly?

A) Increase in interest rates
B) Increase in direct taxes
C) Government subsidies
D) Reduction in government spending
Answer: C) Government subsidies

What term is used to describe the economic measure that combines the average income of individuals within a country?

A) National Income
B) Per Capita Income
C) Gross Domestic Product
D) Net National Product
Answer: B) Per Capita Income

Which type of goods have a negative income elasticity of demand?

A) Normal Goods
B) Inferior Goods
C) Luxury Goods
D) Necessity Goods
Answer: B) Inferior Goods

How does the increase in income generally affect the demand for public goods?

A) Demand decreases
B) Demand remains unchanged
C) Demand increases
D) Demand fluctuates unpredictably
Answer: C) Demand increases

In India, which economic sector is most likely to benefit from an increase in disposable income?

A) Primary Sector
B) Secondary Sector
C) Tertiary Sector
D) Quaternary Sector
Answer: C) Tertiary Sector

Which of the following reflects the degree of income inequality within a country?

A) Lorenz Curve
B) Phillips Curve
C) Laffer Curve
D) Kuznets Curve
Answer: A) Lorenz Curve