#1
1. What is the law of demand in economics?
As price decreases, quantity demanded increases.
ExplanationInverse relationship between price and quantity demanded.
#2
2. Which of the following is not a determinant of demand?
Cost of production
ExplanationProduction cost impacts supply, not demand.
#3
7. In the law of demand, what is the assumption regarding other factors?
All other factors remain constant.
ExplanationDemand changes only due to price, assuming other factors constant.
#4
15. According to the substitution effect, what happens when the price of a good increases?
Consumers substitute the good with a lower-priced alternative.
ExplanationShift to cheaper alternatives due to price increase.
#5
20. What is the difference between a change in quantity demanded and a shift in demand?
A change in quantity demanded is a movement along the demand curve, while a shift in demand is a change in the entire curve.
ExplanationQuantity change versus curve shift due to factors other than price.
#6
3. What is the concept of elasticity of demand?
It measures the responsiveness of quantity demanded to changes in price.
ExplanationSensitivity of demand to price changes.
#7
4. How does the availability of substitutes affect the elasticity of demand?
More substitutes lead to more elastic demand.
ExplanationSubstitutes increase consumers' responsiveness to price changes.
#8
6. What is the income effect in the context of demand?
It is the change in quantity demanded resulting from a change in consumer income.
ExplanationChanges in demand due to changes in consumer income.
#9
9. What is the role of expectations in influencing demand?
Expectations can influence consumer preferences and affect demand.
ExplanationExpectations alter consumer behavior, impacting demand.
#10
11. What is the difference between normal goods and inferior goods?
Normal goods experience an increase in demand as consumer income rises, while inferior goods see a decrease.
ExplanationEffect of income changes on demand for different goods.
#11
5. What is the cross-price elasticity of demand?
It measures the responsiveness of quantity demanded to a change in the price of a different good.
ExplanationImpact of price changes of one good on the demand for another.
#12
8. How does the concept of 'Veblen goods' contradict the law of demand?
Veblen goods have a positive relationship with price and quantity demanded.
ExplanationPrice increase of Veblen goods can increase demand.
#13
10. According to the law of diminishing marginal utility, what happens as consumption increases?
Marginal utility decreases at an increasing rate.
ExplanationDecrease in additional satisfaction as consumption rises.
#14
12. How does the concept of 'consumer tastes and preferences' impact demand elasticity?
Consumer tastes and preferences can affect the sensitivity of quantity demanded to price changes.
ExplanationPreferences influence how consumers respond to price changes.
#15
13. What is the relationship between price elasticity of demand and total revenue?
As price elasticity increases, total revenue increases.
ExplanationEffect of price change on revenue due to demand responsiveness.