Which of the following is a characteristic of a Giffen good? MCQ with Answer and Explanation

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Which of the following is a characteristic of a Giffen good?

A. Demand decreases as price increases

B. It is a luxury good

C. Income elasticity is positive

D. Demand increases as price increases due to strong negative income effect

Answer: Option D

Solution (By JKSSB Mock Tests)

A Giffen good is an inferior good for which the negative income effect outweighs the substitution effect, resulting in an upward-sloping demand curve.

This question belongs to: Economy GK Economy Set 1

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Question #1

In the context of market structures, price rigidity is a feature of:

A. Perfect competition

B. Monopolistic competition with free entry only

C. Oligopoly

D. Monopoly with no barriers

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Correct Answer: Option C

Explanation:
Oligopolistic markets often exhibit price rigidity, explained by the kinked demand curve model, due to inter-firm interdependence.

This question belongs to: Economy GK Economy Set 1

Question #2

In the context of inflation, 'Core Inflation' excludes:

A. Manufactured goods prices

B. Food and fuel prices

C. Service prices

D. Housing prices

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Correct Answer: Option B

Explanation:
Core inflation is a measure of inflation that excludes volatile items such as food and fuel prices to give a better picture of underlying inflation trends.

This question belongs to: Economy GK Economy Set 1

Question #3

The concept of 'Social Preferences' in behavioural economics includes:

A. Preferences that take into account the payoffs or intentions of others, such as altruism, fairness and reciprocity

B. Only preferences over absolute income

C. Only self-regarding preferences

D. Only preferences over private consumption

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Correct Answer: Option A

Explanation:
Social preferences encompass motives such as altruism, inequity aversion, reciprocity and spite that make an individual’s utility depend on the payoffs or actions of other people.

This question belongs to: Economy GK Economy Set 1

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