#1
What is the basic economic problem that arises due to scarcity?
Opportunity cost
ExplanationThe value of the best alternative forgone in order to pursue a particular choice
#2
What is the difference between a normal good and an inferior good?
The demand for normal goods increases with income, while the demand for inferior goods decreases with income
ExplanationNormal goods are those whose demand rises with income, whereas inferior goods' demand decreases as income rises
#3
What is the law of supply in economics?
As the price of a good increases, the quantity supplied increases
ExplanationSuppliers tend to offer more of a good at higher prices
#4
What is the difference between a recession and a depression in economics?
A recession is a milder economic downturn than a depression
ExplanationRecessions involve a decline in economic activity over a short period, while depressions are severe and prolonged downturns with widespread unemployment and economic hardship
#5
What is the concept of 'elasticity of supply' in economics?
The responsiveness of quantity supplied to changes in price
ExplanationElasticity of supply measures how quantity supplied changes in response to changes in price
#6
In the context of supply and demand, what happens to equilibrium price and quantity if demand increases and supply remains constant?
Price increases, quantity increases
ExplanationAs demand increases, both price and quantity demanded increase
#7
What is the 'law of diminishing marginal utility'?
As the quantity of a good consumed increases, the additional satisfaction derived from each additional unit decreases
ExplanationAs consumption of a good increases, the additional satisfaction derived from each additional unit declines
#8
What does the term 'elasticity of demand' measure?
The responsiveness of quantity demanded to a change in price
ExplanationElasticity of demand indicates how quantity demanded changes in response to price changes
#9
How does a government budget deficit impact the economy?
Increases government debt
ExplanationA budget deficit occurs when government spending exceeds revenue, leading to increased borrowing and national debt
#10
What is a 'black market' in the context of economics?
An illegal market where goods are bought and sold without government regulation
ExplanationA black market operates outside the legal framework, trading goods or services prohibited or heavily regulated by authorities
#11
What is the role of a central bank in controlling inflation?
Increasing interest rates
ExplanationTo combat inflation, central banks raise interest rates to reduce borrowing and spending
#12
What is the difference between perfect competition and monopoly?
All of the above
ExplanationPerfect competition involves many firms, identical products, easy entry and exit, while monopoly is characterized by a single seller, unique product, and barriers to entry
#13
What is the concept of 'opportunity cost'?
The value of the best alternative forgone in order to pursue a particular choice
ExplanationThe opportunity cost represents the benefits sacrificed by choosing one alternative over another
#14
In the context of international trade, what does a trade surplus indicate?
A country is exporting more than it is importing
ExplanationA trade surplus signifies that a country's exports exceed its imports, leading to a positive balance of trade
#15
What is the role of fiscal policy in the economy?
Influence government spending and taxation to manage economic conditions
ExplanationFiscal policy refers to government decisions regarding spending, taxation, and borrowing to influence economic activity