#1
Which of the following describes economic equilibrium?
A state of balance where supply equals demand
ExplanationSupply matches demand in equilibrium.
#2
What happens to price and quantity when there is excess demand in a market?
Price increases, quantity decreases
ExplanationPrice rises, quantity falls with excess demand.
#3
What does the law of demand state?
As price increases, quantity demanded increases
ExplanationInverse relationship: price up, demand down.
#4
Which of the following is NOT a determinant of supply?
Income of consumers
ExplanationConsumer income doesn't affect supply.
#5
What is the role of price in a market economy?
To allocate resources efficiently
ExplanationPrice allocates resources in economy.
#6
Which of the following is a characteristic of a perfectly competitive market?
Homogeneous products
ExplanationPerfect competition: identical products.
#7
What is the substitution effect?
A change in the price of one good affects the demand for another
ExplanationPrice change alters demand for substitutes.
#8
Which of the following is NOT a factor that can shift the demand curve?
Changes in technology
ExplanationTechnological changes don't shift demand.
#9
What is a price ceiling?
A legal maximum price for a good or service
ExplanationPrice ceiling: legal max price.
#10
What is a price floor?
A legal minimum price for a good or service
ExplanationPrice floor: legal min price.
#11
What is elasticity of demand?
The responsiveness of quantity demanded to a change in price
ExplanationElasticity: demand response to price change.
#12
What is the income effect?
A change in the price of a good affects the real purchasing power of income
ExplanationPrice change impacts purchasing power.
#13
What is the cross-price elasticity of demand?
The responsiveness of quantity demanded of one good to a change in the price of another good
ExplanationDemand response to price change of another good.
#14
What is the law of supply?
As price increases, quantity supplied increases
ExplanationPositive relationship: price up, supply up.
#15
In economics, what is the term for the situation when quantity supplied exceeds quantity demanded at a given price?
Surplus
ExplanationExcess supply is called a surplus.
#16
What is a market equilibrium?
A point where supply equals demand
ExplanationBalance: supply equals demand.
#17
What is a market disequilibrium?
A situation where there is excess demand
ExplanationDisequilibrium: excess demand.
#18
What is a market surplus?
A situation where there is excess supply
ExplanationSurplus: excess supply in the market.
#19
What is consumer surplus?
The difference between the highest price a consumer is willing to pay and the price they actually pay
ExplanationConsumer surplus: difference in price willing to pay vs. actual.