#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 the concept of total surplus in economics?
The sum of consumer surplus and producer surplus
ExplanationAggregate welfare gained from market transactions.
#11
What is a subsidy?
A payment made by the government to producers or consumers of a good
ExplanationFinancial assistance provided by the government.
#12
What is a price ceiling?
A legal maximum price that can be charged for a good
ExplanationGovernment-imposed maximum price.
#13
What is a price floor?
A legal minimum price that must be paid for a good
ExplanationGovernment-imposed minimum price.
#14
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.
#15
What is the income elasticity of demand for a normal good?
Greater than zero
ExplanationPositive responsiveness of demand to income changes.
#16
What is the cross-price elasticity of demand for substitute goods?
Greater than zero
ExplanationPositive responsiveness of demand to price changes of substitutes.
#17
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.
#18
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.
#19
What is the concept of elasticity of labor supply?
A measure of how much the quantity supplied of labor responds to a change in wages
ExplanationSensitivity of labor supply to wage changes.
#20
What is the concept of elasticity of capital supply?
A measure of how much the quantity supplied of capital responds to a change in interest rates
ExplanationSensitivity of capital supply to interest rate changes.
#21
What is the concept of elasticity of taxation?
A measure of how much tax revenue changes with a change in tax rates
ExplanationResponsiveness of tax revenue to tax rate changes.
#22
What is the concept of price elasticity of demand for a luxury good?
Greater than zero
ExplanationPositive responsiveness of demand for luxury goods to price changes.
#23
What is the concept of price elasticity of demand for a necessity?
Equal to zero
ExplanationNo change in demand for necessities despite price changes.
#24
What is the concept of price elasticity of demand for an inferior good?
Less than zero
ExplanationNegative responsiveness of demand for inferior goods to price changes.
#25
What is the concept of price elasticity of supply for a perfectly inelastic supply?
Equal to zero
ExplanationNo change in quantity supplied despite price changes for perfectly inelastic supply.