#1
What does the law of demand state?
As price decreases, demand increases
ExplanationPrice and demand have an inverse relationship.
#2
What is a determinant of supply?
Technology
ExplanationTechnological advancements impact production capabilities.
#3
What is the equilibrium price?
The price at which quantity supplied equals quantity demanded
ExplanationMarket state where supply meets demand.
#4
What is a complementary good?
A good that is used in conjunction with another good
ExplanationProducts consumed together, where demand for one influences the other.
#5
What is a surplus?
When quantity supplied exceeds quantity demanded
ExplanationExcess supply in the market.
#6
What is a price ceiling?
A government-imposed maximum price above which a good or service cannot be sold
ExplanationRegulation to prevent prices from rising above a set level.
#7
What happens to market equilibrium if there is an increase in both demand and supply?
Equilibrium quantity increases, price is indeterminate
ExplanationQuantity supplied and demanded rise, affecting equilibrium quantity.
#8
What is price elasticity of demand?
The responsiveness of quantity demanded to changes in price
ExplanationMeasure of consumer sensitivity to price changes.
#9
What is a price floor?
A government-imposed minimum price below which a good or service cannot be sold
ExplanationRegulatory measure to prevent prices from dropping below a certain level.
#10
What is the law of supply?
As price increases, supply increases
ExplanationPositive correlation between price and quantity supplied.
#11
Which factor does NOT typically cause a shift in the supply curve?
Changes in consumer preferences
ExplanationSupply curve shifts due to production-related factors, not consumer taste changes.
#12
What is the income elasticity of demand for normal goods?
Positive
ExplanationNormal goods have positive income elasticity, meaning demand increases with income.
#13
What is the difference between a movement along the demand curve and a shift of the demand curve?
A movement represents a change in quantity demanded at a specific price, while a shift represents a change in quantity demanded at all prices
ExplanationMovement along curve: Price change; Shift: Non-price factors affect demand.
#14
What is elasticity of supply?
The responsiveness of quantity supplied to changes in price
ExplanationHow much producers adjust output in response to price changes.
#15
In the long run, a perfectly competitive market will adjust to changes in demand by:
Both adjusting quantity supplied and prices
ExplanationMarket equilibrium achieved through price and output adjustments.