#1
What is the law of demand?
As price decreases, quantity demanded increases.
ExplanationInverse relationship between price and quantity demanded.
#2
What is the law of supply?
As price increases, quantity supplied increases.
ExplanationDirect relationship between price and quantity supplied.
#3
What is the market equilibrium?
When supply equals demand.
ExplanationPoint of balance where quantity supplied equals quantity demanded.
#4
What is a price ceiling?
A maximum price that can be charged for a good or service.
ExplanationLegal limit on the price of a good or service.
#5
What is a price floor?
A minimum price that can be charged for a good or service.
ExplanationLegal limit on the lowest price of a good or service.
#6
What is the difference between a monopoly and an oligopoly?
A monopoly has one seller, and an oligopoly has a few sellers.
ExplanationMarket structure with one or a few dominant sellers.
#7
What is a demand curve?
A graphical representation of the relationship between price and quantity demanded.
ExplanationIllustrates the price-quantity relationship from consumer perspective.
#8
What is a supply curve?
A graphical representation of the relationship between price and quantity supplied.
ExplanationIllustrates the price-quantity relationship from producer perspective.
#9
What is the substitution effect?
When consumers switch to a substitute good as its price falls and away from it as its price rises.
ExplanationConsumer response to price changes by opting for substitutes.
#10
What is the point of intersection between the supply and demand curves called?
Market equilibrium.
ExplanationBalance point where supply equals demand.
#11
What is the difference between a shift and a movement along a demand curve?
A shift is a change in demand due to a change in price, while a movement along the curve is a change in quantity demanded due to a change in income.
ExplanationShifts reflect non-price determinants; movements are due to price changes.
#12
What is the formula for price elasticity of demand?
Percentage change in price divided by percentage change in quantity demanded.
ExplanationMathematical expression of responsiveness of quantity demanded to price changes.
#13
What is the difference between nominal and real interest rates?
Real interest rates are adjusted for inflation, while nominal interest rates are not.
ExplanationReal rates account for inflation, nominal rates do not.
#14
What is the concept of 'opportunity cost'?
The cost of an alternative that must be forgone in order to pursue a certain action.
ExplanationValue of the next best alternative foregone.