MICRO ECONOMICS

ASSIGNMENT

SUBMITTED TO – SUBMITTED BY
PREETI SINGH CHIRAG BANSAL
BBA 2ND SEM
 Concept of Demand: -
Demand in economics means a desire to possess a good supported by
willingness and ability to pay for it. If you have a desire to buy a certain
commodity, say a car, but you do not have the adequate means to pay for it, it
will simply be a wish a desire or a want and not demand. Demand is an
effective desire which is backed by willingness and ability to pay for a
commodity in order to obtain it.
“Demand mean the quantity of a commodity demanded per unit of time at
a certain price”
According to BR SCHILLER:
“Demand is the Ability and willingness to buy specific quantity of goods at
alternative price in a given time period”
Demand for various goods can be classified on the basis of the numbers of
consumers of a product, nature of goods, interdependence of demand nature of
the use of product etc.

Types of demand:
1.Individual demand
2.Market demand
3.Ex ante demand
4.Ex post demand
5.Joint demand
6.Derived demand
7.Composite demand
Factors affecting demand:
The demand for a good depends on several factors, such as price of the good,
perceived quality, advertising, income, confidence of consumers and changes in
taste and fashion.

We can look at either an individual demand curve or the total demand in the
economy.

 The individual demand curve illustrates the price people are willing
to pay for a particular quantity of a good.
 The market demand curve will be the sum of all individual demand
curves. It shows the quantity of a good consumers plan to buy at
different prices.

1. Change in price
A change in price causes a movement along the Demand Curve.
For example, if there is an increase in price from $12 to £16 then there will be a
fall in demand from 80 to 60.

How important is price?

Some goods are more affected by price than others.

 If petrol increases in price, because it is a necessity, there is only a

small fall in demand (we say it is inelastic demand).
 If Volvic water increases in price, there will be a significant fall in
demand because people buy cheaper substitutes (demand is elastic)

Shifts in the demand curve

This occurs when, even at the same price, consumers are willing to buy a higher
(or lower) quantity of goods. This will occur if there is a shift in the conditions
of demand.

Even at the same price of $12, more is demanded.

Factors which can shift the demand curve

A shift to the right in the demand curve can occur for a number of reasons:

1. Income. An increase in disposable income enabling consumers to

be able to afford more goods. Higher income could occur for a
variety of reasons, such as higher wages and lower taxes.
2. Credit facilities. If it is easier and cheaper to borrow, this may
encourage consumers to buy expensive items on credit, for
example, cars and foreign holidays.
3. Quality. An increase in the quality of the good e.g. better quality
digital cameras encourages people to buy one.
 4. Advertising can increase brand loyalty to goods and increase
demand. For example, higher spending on advertising by Coca
Cola has increased global sales.
5. Substitutes. An increase in the price of substitutes, e.g. if the price
of Samsung mobile phones increases, this will increase the demand
for Apple iPhones – a major substitute for the Samsung.
6. Complements. A fall in the price of complements will increase
demand. E.g. a lower price of Play Station 2 will increase the
demand for compatible Play Station games.
7. Weather: In cold weather, there will be increased demand for fuel
and warm weather clothes.
8. Expectations of future price increases. A commodity like gold
may be bought due to speculative reasons; if you think it might go
up in the future, you will buy now
Fall in Demand

A fall in demand could occur due to lower disposable income or decline in the
popularity of the good.

Evaluation
 For some luxury goods, income will be an important determinant
of demand. e.g., if your income increased you would buy more
restaurant meals, but probably not more salt.
 Advertising is important for goods in which branding is important,
e.g., soft drinks but not for bananas.
Other types of demand
 Effective demand: This occurs when a consumer’s desire to buy a
good can be backed up by his ability to afford it.
 Derived demand: This occurs when a good or factor of production
such as labour is demanded for another reason
 A Giffen good is a good where an increase in price of a basic item
leads to an increase in demand, because very poor people cannot
afford any other luxury goods.
  An ostentatious good, is a good where an increase in price leads to
an increase in demand because people believe it is now better.
 Composite demand – A good which is demanded for multiple
different uses
 Joint demand – goods bought together e.g., printer and printer ink.

The Demand Function:

The demand function shows the relation between the quantity demanded of a
commodity by the consumers and the price of the product. These functions are
probably the most important tools used by economists. While many variables
determine the quantity consumers wish to purchase in a market, the price of the
commodity is perhaps the most important one.

In this context, we may distinguish between individual demand and market de-
mand. The former refers to the quantity of a good that an individual stands
ready to buy at each of several prices, at a particular time, under given
conditions.

The latter consists of the total quantity of a good that would be bought in the
aggregate by individuals and firms, at each of the various prices, at a fixed point
of time. The demand schedules may be graphed or shown in a tabular form.
When a demand schedule is graphed, it is called the demand curve.

Laws of Demand:
The inverse relationship between the price of a good and the quantity of it
demanded is observed in reality with such regularity that it is known as the law
of demand. This observed regularity means that the law of demand is an
empirical (statistical) law. An algebraic expression of the relationship between
price and quantity demanded is known as a demand function.

The law of demand holds because, when the price of a good increases,
consumers tend to buy less of it and more of other goods. The converse is also
true. In the event of a fall in the price of a good, consumers tend to buy more of
that good in place of other goods that are now relatively more expensive.

Next, we may look at income changes. If we hold the other variables constant,
an increase in income can cause the quantity demanded of a commodity either
to increase or to decrease. If an increase (a decrease) in income causes quantity
demanded to increase (decrease) we refer to such a commodity as a ‘normal’
good, that is, in which case income and sales vary directly.
However, there are commodities the quantities demanded of which may fall
when income rises, other variables held constant. These types of commodities
are known as ‘inferior’ goods.

Commodities are related in consumption in either of two ways: as substitutes or

complements. In general, goods are substitutes if one good can be used in the
place of the other; an example might be Maruti cars and Fiat cars. If two goods
are substitutes, an increase in the price of one good will increase the quantity
purchased of the other (holding the price of the good under consideration
constant).

If the price of Maruti Car rises while the price of Fiat car remains constant, we
would expect consumers to purchase more Fiat cars. A fall in the price of a
substitute good will reduce the quantity purchased of the other good.

For example, if the price of tea falls, we would expect the quantity of coffee
purchased to fall, given a constant price of coffee. Goods are said to be
complementary if they are used in conjunction with each other.
Examples might be tennis racket and tennis ball or cars and petroleum. An
increase in the price of either of the complementary goods will lead to fall in the
quantity demanded of the other goods, the price of the other good held constant.
However, all commodities are not necessarily either substitutes or complements
in consumption. Various commodities are essentially independent. For example,
one cannot expect the price of butter to significantly influence the sales of
shoes. Thus, we can treat these commodities as independent and ignore the price
of butter when evaluating the demand for shoes.
Expectations of consumers also influence the quantity demanded of a
commodity. To be more specific, consumers’ expectations about the future price
of the commodity can change their current purchases.
If consumers expect the price to be higher in a future period, sales would
probably tend to rise in the current period. On the contrary, expectations of a
price drop in the future would cause some purchases to be postponed; thus sales
in the current period will fall.
Finally, a change in taste or preferences can change the quantity demanded of a
commodity, the other variables held constant. Clearly, changes in taste and
preferences could either increase or decrease sales of a product such as
readymade garments.
Since it is difficult to measure taste, economists normally take this variable as
constant. However, this factor is very important in understanding the effects of
advertising, which shifts demand from one product to another.
We can express the function describing the quantity that consumers are willing
and able to purchase during a particular time period
The effects of changes in the variables that determine the quantity demanded (or
bought) in a market during a fixed period of time may be summarized as
follows, where the symbol Δ denotes “the change in”:
It may be repeated that these relations hold if all other things remain the same.
An increase in the price of the commodity will lead to a decrease in quantity
demanded as long as the other variables — income, the price of related
commodities, taste, and price expectations — remain unchanged

Exceptions to law of demand

Giffen Goods
Giffen Goods is a concept that was introduced by Sir Robert Giffen. These
goods are goods that are inferior in comparison to luxury goods. However, the
unique characteristic of Giffen goods is that as its price increases, the demand
also increases. And this feature is what makes it an exception to the law of
demand.

The Irish Potato Famine is a classic example of the Giffen goods concept.
Potato is a staple in the Irish diet. During the potato famine, when the price of
potatoes increased, people spent less on luxury foods such as meat and bought
more potatoes to stick to their diet. So as the price of potatoes increased, so did
the demand, which is a complete reversal of the law of demand.

Veblen Goods
The second exception to the law of demand is the concept of Veblen goods.
Veblen Goods is a concept that is named after the economist Thorstein Veblen,
who introduced the theory of “conspicuous consumption “. According to
Veblen, there are certain goods that become more valuable as their price
increases. If a product is expensive, then its value and utility are perceived to be
more, and hence the demand for that product increases.

And this happens mostly with precious metals and stones such as gold and
diamonds and luxury cars such as Rolls-Royce. As the price of these goods
increases, their demand also increases because these products then become a
status symbol.

The expectation of Price Change

In addition to Giffen and Veblen goods, another exception to the law of demand
is the expectation of price change. There are times when the price of a product
increases and market conditions are such that the product may get more
expensive. In such cases, consumers may buy more of these products before the
price increases any further. Consequently, when the price drops or may be
expected to drop further, consumers might postpone the purchase to avail the
benefits of a lower price.

For instance, in recent times, the price of onions had increased to quite an
extent. Consumers started buying and storing more onions fearing further price
rise, which resulted in increased demand.

There are also times when consumers may buy and store commodities due to a
fear of shortage. Therefore, even if the price of a product increases, its
associated demand may also increase as the product may be taken off the shelf
or it might cease to exist in the market.

Necessary Goods and Services

Another exception to the law of demand is necessary or basic goods. People will
continue to buy necessities such as medicines or basic staples such as sugar or
salt even if the price increases. The prices of these products do not affect their
associated demand.

Change in Income
Sometimes the demand for a product may change according to the change in
income. If a household’s income increases, they may purchase more products
irrespective of the increase in their price, thereby increasing the demand for the
product. Similarly, they might postpone buying a product even if its price
reduces if their income has reduced. Hence, change in a consumer’s income
pattern may also be an exception to the law of demand.

Movement of the Demand Curve

When there is a change in the quantity demanded of a particular commodity,
because of a change in price, with other factors remaining constant, there is a
movement of the quantity demanded along the same curve. The important aspect
to remember is that other factors like the consumer’s income and tastes along with
the prices of other goods, etc. remain constant and only the price of the
commodity changes.
In such a scenario, the change in price affects the quantity demanded but the
demand follows the same curve as before the price changes. This is Movement of
the Demand Curve. The movement can occur either in an upward or
downward direction along the demand curve.

We know that if all other factors remain constant, then an increase in the price of a
commodity decreases its demand. Also, a decrease in the price increases
the demand. So, what happens to the demand curve?

we can see that when the price of a commodity is OP, its demand is OM
(provided other factors are constant). Now, let’s look at the effect of an increase
and decrease in price on the demand:

 When the price increases from OP to OP”, the quantity demanded

falls to OL. Also, the demand curve moves UPWARD.
 When the price decreases from OP to OP’, the quantity demanded
rises to ON. Also, the demand curve moves DOWNWARD.
Therefore, we can see that a change in price, with other factors remaining constant
moves the demand curve either up or down.

The shift of the Demand Curve

When there is a change in the quantity demanded of a particular commodity, at
each possible price, due to a change in one or more other factors, the demand
curve shifts. The important aspect to remember is that other factors like the
consumer’s income and tastes along with the prices of other goods, etc., which
were expected to remain constant, changed.

In such a scenario, the change in price, along with a change in one/more other
factors, affects the quantity demanded. Therefore, the demand follows a different
curve for every price change.This is the Shift of the Demand Curve. The demand
curve can shift either to the left or the right, depending on the factors affecting it.

Let’s look at an example which captures the effect of a change in

We can see that if the income changes, then a change in price shifts the demand
curve. In this case, the shift is to the right which indicates that there is an increase
in the desire to purchase the commodity at all prices. Hence, we can conclude that
with an increase in income the demand curve shifts to the right. On the other hand,
if the income falls, then the demand curve will shift to the left decreasing the
desire to purchase the commodity.
Supply
Supply may be defined as a schedule which shows the various amounts of a
product which a particular seller is willing and able to produce and make
available for sale in the market at each specific price in a set of possible prices
during a given period this case, only commodity and price are specified; thus, it
cannot be considered as supply. However, there is another seller who offers the
same commodity at 110 per piece in the market for the next six months from
now on. In this case, commodity, price, and time are specified, thus it is supply.

Classification of supply-
 Individual supply is the quantity of goods a single producer is willing to
supply at a particular price and time in the market. In economics, a single
producer is known as a firm.
 Market supply is the quantity of goods supplied by all firms in the market
during a specific time period and at a particular price. Market supply is
also known as industry supply as firms collectively constitute an industry.

Determinants of Supply
9 Determinants of supply are:
1. Price of a product
2. Cost of production
3. Natural conditions
4. Transportation conditions
5. Taxation policies
6. Production techniques
7. Factor prices and their availability
8. Price of related goods
9. Industry structure

Price of a product
The major determinants of the supply of a product is its price. An increase in the
price of a product increases its supply and vice versa while other factors remain
the same.

Cost of production
It is the cost incurred on the manufacturing of goods that are to be offered to
consumers. Cost of production and supply are inversely proportional to each
other.
Natural conditions
The supply of certain products is directly influenced by climatic conditions. For
instance, the supply of agricultural products increases when the monsoon comes
well on time.

Transportation conditions
Better transport facilities result in an increase in the supply of goods. Transport
is always a constraint to the supply of goods. This is because goods are not
available on time due to poor transport facilities.

Taxation policies
Government’s tax policies also act as a regulating force in supply. If the rates of
taxes levied on goods are high, the supply will decrease. This is because high
tax rates increase overall productions costs, which will make it difficult for
suppliers to offer products in the market.

Production techniques
The supply of goods also depends on the type of techniques used for production.
Obsolete techniques result in low production, which further decreases the
supply of goods.

Factor prices and their availability

The production of goods is dependent on the factors of production, such as raw
material, machines and equipment, and labour.

Price of related goods

The prices of substitutes and complementary goods also influence the supply of
a product to a large extent.

Industry structure
The supply of goods is also dependent on the structure of the industry in which
a firm is operating. If there is monopoly in the industry, the manufacturer may
restrict the supply of his/her goods with an aim to raise the prices of goods and
increase profits.

Supply Function
Supply function is the mathematical expression of law of supply. In other
words, supply function quantifies the relationship between quantity supplied
and price of a product, while keeping the other factors at constant.
The law of supply expresses the nature of the relationship between quantity
supplied and price of a product, while the supply function measures that
relationship.
The supply function can be expressed as:

Qs = f (Pa, Pb, Pc, T, Tp)

Where,
Qs = Supply
Pa = Price of the good supplied
Pb = Price of other goods
Pc = Price of factor input
T = Technology
Tp = Time Period
According to the supply function, the quantity supplied of a good (Qs) varies
with the price of that good (Pa), the price of other goods (Pb), the price
of factor input (Pc), the technology used for production (T), and time period

'Law of Supply'
Description: Law of supply depicts the producer behaviour at the time of
changes in the prices of goods and services. When the price of a good rises, the
supplier increases the supply in order to earn a profit because of higher prices.

The above diagram shows the supply curve that is upward sloping (positive
relation between the price and the quantity supplied). When the price of the
good was at P3, suppliers were supplying Q3 quantity. As the price starts rising,
the quantity supplied also starts rising.
Movement along a supply curve
The amount of commodity supplied changes with rise and fall of the price while
other determinants of supply remain constant. This change, when shown in the
graph, is known as movement along a supply curve.

In simple words, movement along a supply curve represents the variation in

quantity supplied of the commodity with a change in its price and other factors
remaining unchanged.

The movement in supply curve can be of two types – extension and contraction.
Extension in a supply curve is caused when there is an increase in the price or
quantity supplied of the commodity while contraction is caused due to a
decrease in the price or quantity supplied of the commodity.

In the above fig. II, let us suppose Rs. 20 is the original price of milk per later
and 20,000 litres is the original quantity of supply. When the price rises from
Rs. 20 to Rs. 30, the amount of quantity supplied rises from 20,000 lifers to
30,000 litres, and there is a movement in the supply curve from point B to point
C. This movement is known as an extension of the supply curve.

Similarly, when the price falls from Rs. 20 to Rs. 10, the amount of quantity
supplied falls from 20,000 litres to 10,000 litres, and there is another movement
in the supply curve from point B to point A. This movement is known as a
contraction of the supply curve.

Shift in supply curve

The amount of commodity that the producers or suppliers are willing to offer at
the marketplace can change even in cases when factors other than the price of
the commodity change. Such non-price factors can be the cost of factors of
production, tax rate, state of technology, natural factors, etc.

When the quantity of the commodity supplied changes due to change in non-
price factors, the supply curve does not extend or contract but shifts entirely.
For an instance, the introduction of improved technology in industries helps in
reducing the cost of production and induces production of more units of a
commodity at the same price. As a result, the quantity of commodity supplied
increases but the price of the commodity remains as
Shift in supply curve

The shift in supply curve can also be of two types – rightward shift and leftward
shift. The rightward shift occurs in supply curve when the quantity of supplied
commodity increases at same price due to favourable changes in non-price
factors of production of the commodity. Similarly, a leftward shift occurs when
the quantity of supplied commodity decreases at the same price.

In the above fig. III, let us suppose that SS is the original supply curve where Q
amount of commodity has been supplied at price P. Due to favourable changes
in non-price factors, the production of the commodity has increased and its
supply has been increased by Q2 – Q amount, at the same price. This has caused
the supply curve rightwards and new supply curve S2S2 has formed.
In the same, due to unfavourable changes in non-price factors of the
commodity, the production and supply have fallen to Q1 amount. Accordingly,
the supply curve has shifted leftwards and new supply curve S1S1 has formed.

Reasons for rightward shift of supply curve

 Improvement in technology
 Decrease in tax
 Decrease in cost of factor of production
 Favourable weather condition
 Seller’s expectation of fall in price in future
Reasons for leftward shift of supply curve
 Use of old or outdated technology
 Increase in tax
 Increase in cost of factor of production
 Unfavourable weather condition
 Seller’s expectation of rise in price in future
ASSIGNMENT 2
 MCQ’S
UNIT 1: -

1. ‘Economics is the study of mankind in the ordinary business of life’. This

definition was given by: –

(a) Adam Smith

(b) Lord Robbins
(c) Alfred Marshall
(d) Samuelson

2. The branch of economic theory, that deals with the problem of allocation of
resources:
is
(a) Micro Economics
(b) Macro Economics
(c) Econometrics
(d) None of these

3. A study of how increase in the corporate income tax rate, will affect the
natural unemployment rate is an example of:

(a) Macro Economics

(b) Descriptive Economics
(c) Micro Economics
(d) Normative Economics

4. If a point falls inside the production possibility curve, what does it indicate?

(a) Resources are over utilized

(b) Resources are under utilized
(c) There is employment in the economy
(d) Both (b) and (c)

5. In which type of economy do consumers and producers make their choices

based on the market forces of demand and supply?

(a) Open Economy

(b) Controlled Economy
(c) Command Economy
(d) Market Economy
6. Under a free economy, prices are:

(a) Regulated
(b) Determined through free interplay of demand and supply
(c) Partly regulated.
(d) None of these

7. Which of the following falls under micro economics?

(a) National income

(b) General price level
(c) Factor pricing
(d) National saving and investment

8. In a free market economy, when consumers increase their purchase of a

goods and the level of _______ exceeds _______ then prices tend to rise

(a) Demand, Supply

(b) Supply, Demand
(c) Prices, Demand
(d) Profits, Supply

9. Under Inductive method, the logic proceeds from:

(a) General to particulars

(b) Particular to general
(c) Both (a) and (b)
(d) None

10. According to Robbins, ‘means are:

(a) Scarce
(b) Unlimited
(c) Undefined
(d) All of these

ANSWERS
1. (c) Alfred Marshall 2. (a) Micro Economics 3. (a) Macro Economics 4.
(b) Resources are under utilized

5. (d) Market Economy 6. (b) Determined through free interplay of demand and

supply 7. (c) Factor pricing 8. (a) Demand, Supply 9. (b) Particular to general
10 (a) Scarce
UNIT2-

1 Normally a demand curve will have the shape:

A Horizontal
B Vertical
C Downward sloping
D Upward sloping
Answer: Downward sloping
2. Which one is the assumption of law of demand?
A Price of the commodity should not change
B Quantity demanded should not change
C Prices of substitutes should not change
D Demand curve must be linear
Answer: Prices of substitutes should not change
3. The elasticity of demand of durable goods is:
A Less than unity
B Greater than unity
C Equal to unity
D Zero
Answer: Greater than unity
4 Which among the following statement is INCORRECT?
A On a linear demand curve, all the five forms of elasticity can be depicted’
B If two demand curves are linear and intersecting each other than coefficient of
elasticity would be same on different demand curves at the point of intersection.
C If two demand curves are linear, and parallel to each other than at a particular
price the coefficient of elasticity would be different on different demand curves
D The price elasticity of demand is expressed in terms of relative not absolute,
changes in Price and quantity demanded’
Answer: If two demand curves are linear and intersecting each other than
coefficient of elasticity would be same on different demand curves at the point
of intersection.
5. The horizontal demand curve parallel to x-axis implies that the elasticity of
demand is:
A Zero
B Infinite
C Equal to one
D Greater than zero but less than infinity
Answer: Infinite
6. In the short run, when the output of a firm increases, its average fixed cost:
A Remains constant
B Decreases
C Increases
D First decreases and then rises
Answer: Decreases
7 In order to maximise profits a firm endeavour to
A) increase its revenue (B) lower its cost (C) both (A) and (B) (D) increase its
capital

Answer (C) both A&B

8 __ are defined as the change in overall costs that result from particular
decisions being made.
(A) Incremental costs
(B) Book costs
(C) Sunk costs
(D) None of the above
Answer- A) Incremental cost

9 Incremental costs are also known as

(A) avoidable costs
(B) escapable costs
(C) differential costs
(D) all of the above
 Answer D None of the above
10-Which of the following is (are) variable cost(s)?
(A) wages of labour
(B) price of raw material
(C) cost on fuel and power used
(D) all of the above
Answer-D all of the above
UNIT 3
1 Marginal revenue is always less than price at all levels of output in:
A Perfect competition B. Monopoly

C. Both (a) & (b) D. None of the above

Answer B
2 Which of the following is not a characteristic of perfect competition?
the demand curve of firm is
A. Free entry and exit of the firms B.
horizontal

The marginal revenue curve is An individual firm can

C. D.
horizontal influence the price
Answer D

3 When marginal revenue is zero, total revenue:

A. Maximum B. Minimum

C. Zero D. Decreasing
Answer A

4 Marginal revenue is always less than price at all levels of output in:
A. Perfect competition B. Monopoly

C. Both (a) & (b) D. None of the above

Answer B

5 Which of the following is not a characteristic of perfect competition?

Demand curve of a firm is
A. Free entry and exit of the firms B.
horizontal

The marginal revenue curve is An individual firm can

C. D.
horizontal influence the price
Answer D
6 Which of the following is not a characteristic of perfect competition?
Demand curve of a firm is
A. Free entry and exit of the firms B.
horizontal

The marginal revenue curve is An individual firm can

C. D.
horizontal influence the price
Answer C

7 Which of the following is not a characteristic of perfect competition?

Demand curve of a firm is
A. Free entry and exit of the firms B.
horizontal

The marginal revenue curve is An individual firm can

C. D.
horizontal influence the price
Answer B

8 The monopolist can fix any price for his product, but cannot determine
———- for his product.
A. Revenue
B. Cost
C. Supply
D. Demand
ANSWER: D

9 The following industry often is a monopoly —————

A. Cigarette industry
B. Publishing industry
C. Drug industry
D. Electric power industry
ANSWER: D

10 In an oligopolistic market, there are —————

A. a large number of sellers and few buyers
B. few sellers and few buyers
C. few sellers and large number of buyers
D. only one seller
ANSWER: C

Unit 4
1 Quasi-rent is –
1. Short period phenomenon.
2. Long run phenomenon.
3. Time phenomenon.
4. None.
Answer- 1

2 The return to a factor of production which is fixed in supply in the short

period is called
a) Scarcity rent
b) Economic rent
c) Quasi-rent
d) Contractual rent
Answer C

3.The marginal productivity theory of distribution was firstly formulated in its

complete form by
a) Adam Smith b) J. S. Mill c) J. B. Clark d) David Ricardo
Answer- C

4.The “iron law of wages” is

a) The wage-fund theory
b) The marginal productivity theory of wages
c) Collective bargaining
d) The subsistence theory of wages
Answer D

5.According to Prof Knight, profit is the reward for

a) Innovation
b) Capital
c) Foreseeable risks
d) Uncertainty bearing
Answer D

6 The uncertainty-bearing theory of profit was propounded by

a) F. H. Knight b) F. B. Hawley
c) P. A. Samuelson d) Joseph Schumpeter
Answer A

7)Which of the following is not included in the assumptions of Clark’s marginal

productivity of distribution
a) Perfect competition b) Constant population
c) Constant amount of capital d) Labour is heterogeneous
Answer D

8.Marginal productivity theory is also called

a) Real theory b) Classical theory
c) Monetary theory d) None of the above
Answer A

9. Subsistence theory of wages was used by

a) Karl Marx b) Robinson
c) J. S. Mill d) David Ricard
Answer D

10 Profit is also known as

a) Contractual rent b) Residual income
c) Net income d) None of the above
Answer B