#1
Which of the following best describes the law of demand?
As the price of a good increases, the quantity demanded decreases
ExplanationInverse relationship between price and quantity demanded.
#2
What does the law of supply state?
As the price of a good increases, the quantity supplied increases
ExplanationDirect relationship between price and quantity supplied.
#3
What is the equilibrium price?
The price at which quantity demanded equals quantity supplied
ExplanationPoint of market balance between supply and demand.
#4
What is elasticity of demand?
A measure of how much the quantity demanded of a good responds to a change in price
ExplanationSensitivity of quantity demanded to price changes.
#5
What is a determinant of demand?
All of the above
ExplanationFactors affecting consumer willingness to buy.
#6
What is a determinant of supply?
All of the above
ExplanationFactors influencing producer willingness to sell.
#7
What is the price elasticity of supply?
A measure of how much the quantity supplied of a good responds to a change in price
ExplanationSensitivity of quantity supplied to price changes.
#8
What is the concept of consumer surplus?
The difference between the highest price a consumer is willing to pay and the price they actually pay
ExplanationBenefit consumers gain by paying less than their maximum willingness to pay.
#9
What is the concept of producer surplus?
The difference between the price a producer receives and the minimum price they are willing to accept
ExplanationBenefit producers gain by receiving more than their minimum willingness to accept.
#10
What is a price ceiling?
A legal maximum price that can be charged for a good
ExplanationGovernment-imposed maximum price.
#11
What is a price floor?
A legal minimum price that must be paid for a good
ExplanationGovernment-imposed minimum price.
#12
What is the difference between a change in quantity demanded and a change in demand?
A change in quantity demanded is a movement along the demand curve, while a change in demand is a shift of the entire curve
ExplanationMovement vs. shift of demand curve.
#13
What is the income elasticity of demand for a normal good?
Greater than zero
ExplanationPositive responsiveness of demand to income changes.
#14
What is the cross-price elasticity of demand for substitute goods?
Greater than zero
ExplanationPositive responsiveness of demand to price changes of substitutes.
#15
What is the difference between a change in quantity supplied and a change in supply?
A change in quantity supplied is a movement along the supply curve, while a change in supply is a shift of the entire curve
ExplanationMovement vs. shift of supply curve.
#16
What is the concept of deadweight loss?
The loss in total surplus that occurs when the quantity of a good traded is below the efficient level
ExplanationWelfare loss due to inefficient allocation.