Question

as many as you can please

23. When demand and supply both decrease, the impact on price and quantity is that the shifts reinforce each other with respect to quantity, which decreases, but they act as countervailing forces along the price axis. (TRUE/FALSE)? 24. How would you characterize the term business cycle? A. Short-term fluctuation in economic cycle B. Long-term fluctuation in economic activity c. Short-term fluctuation in economic activity D. None of the above 25. You are in a discussion about economics with a Nobel Prize winning economist and he states that "economics can be classified into two broad subfields: macroeconomics and microeconomics and that incentives do not play a key role in understanding economics". Which of these would be your rational response? A. Politely mention that she is wrong B. Agree with her C. Remain star-struck D. All of the above

Answer 1

23) True: When there is a decrease in both demand and decrease in supply, it leads to shift in both the curve towards its left, thus quantity demanded reduces but the reduction/increase in price is depended uopn the magnitude of decrease in supply and demand. Example- if the degree of decrease in both supply and demand is same, price will remain the same. However is degree of decrease in demand is mire than degree in decrease in supply, price will reduce.

24) option B) it is - long term fluctuation in the economic activity.

25) option A) As she is a renouned economist , she should be made aware politely that incentives do play a role, as incentives will provide an impetus to growth in economic activity.

26) False: direct incentives are easy to recognise while indirect incentives are not easily identified. As direct incentives lead to increase in wage while indirect incentives can be though fringe benefits, which is often ignored , eg- working conditions improved.

27) option B) As demand decrease and supply increase, demand curve shifts left and supply curve shift right( by law of demand) , however the degree of magnitude of their change matters to come into conclusion to how price and quantity change. ( as explained in answer 23) . All options are eliminated as it relates to conceptual understanding.

28) option C ) Tax incedence refers to tax burden, which means who is liable to pay. Hence all other options are eliminated .

29) option - c) it relates to comparative advange. Herein resources are allocated as per comparitive advantage, thus it implies that law of increasing opportunity will hold and hence curve bows out. It is totally related to PPF, and is concept based. Other options are irrelavant.

30) option c) Comparative advantage means a country is able to produce goods at a lower cost than its trading partners. It is a defination based question. All options are false.