Test: Introduction To Economics - 1

A good in economics is any object or product (factors of production) that is useful. A commodity is one kind of good. A good that cannot be used by consumers directly, such as an office building or capital equipment, can be called a good because it can be useful if it is sold.

A resource is good or a service because we can extract the resources from nature which can be used as a good .
Example: Cotton is obtained from nature which we wear as a cloth so it is a good.

Central problems arise in an economy due to scarcity of resources having alternative uses in relation to unlimited wants.
The Central Problem of all economies is scarcity.
Limited Resources + Unlimited Wants = Scarcity
Scarcity forces individuals, firms governments and societies to make choices.

A household is a place where al people are living on a common budget and share the resources.

The law of diminishing marginal returns states that, at some point, adding an additional factor of production results in smaller increases in output. With other production factors constant, adding additional workers beyond this optimal level will result in less efficient operations.

Interest received on investment is added in investing activities while preparing cash flow statement.

Purchase of investment during the year Rs.3,75,000 i.e. 5,00,000 + 1,37,500 – 2,50,000 – 12,500 = 3,75,000

Sale of shares of other company are part of investment which is now sold by the company. It is sale of investment, so it will take place in investing activity.

Loose tools and Stores and spares are the part of inventories.

Correct option is B
solution: The percentage change in the quantity demanded divided by the percentage change in price is coefficient of elasticity.

So two linear and parallel demand curves will have the same coefficient of elasticity and the changes in price w.r.t changes in quantity demanded will be the same.