#1
2. Which of the following is a determinant of demand?
Price of substitutes
ExplanationThe price of substitutes is a factor affecting the demand for a product.
#2
7. In a market characterized by perfect competition, what is true about the price of a good?
Determined by the market forces
ExplanationPerfect competition leads to a price determined solely by market forces of supply and demand.
#3
14. What is the main factor influencing the price elasticity of demand for a good?
Substitutability
ExplanationThe degree of substitutability influences how responsive the quantity demanded is to price changes.
#4
20. What is the key characteristic of a perfectly competitive market?
Many sellers with identical products
ExplanationPerfectly competitive markets involve numerous sellers offering identical products with no market power.
#5
1. What happens to the equilibrium price and quantity when demand increases and supply remains constant?
Price and quantity both increase
ExplanationIncrease in demand with constant supply leads to higher equilibrium price and quantity.
#6
4. What is the price elasticity of demand if the absolute value is greater than 1?
Elastic
ExplanationAbsolute value greater than 1 indicates elastic demand, meaning quantity is highly responsive to price changes.
#7
6. What is the main factor that influences the elasticity of supply?
Time
ExplanationElasticity of supply is influenced by the time it takes for producers to adjust their output.
#8
9. How does a decrease in the price of complementary goods affect the demand for a product?
Increases demand
ExplanationLower prices of complementary goods boost the demand for the main product.
#9
12. In the long run, what happens to supply in response to an increase in demand?
Increases
ExplanationIn the long run, producers can increase capacity to meet rising demand, leading to increased supply.
#10
3. In the law of supply, what does the term 'ceteris paribus' mean?
All else being equal
ExplanationCeteris paribus signifies that other factors remain constant when analyzing the law of supply.
#11
5. How does a price ceiling affect the market for a good?
Causes a shortage
ExplanationA price ceiling sets a maximum price, causing a shortage by suppressing the natural equilibrium.
#12
8. What is the concept of a 'Giffen good' in economics?
An inferior good with an upward-sloping demand curve
ExplanationGiffen goods are inferior and defy typical demand curves by having an upward slope.
#13
10. What is the relationship between the price and quantity demanded in a perfectly elastic demand curve?
Inversely proportional
ExplanationIn a perfectly elastic demand curve, any price increase leads to quantity demanded falling to zero.
#14
11. What is the concept of 'deadweight loss' in the context of supply and demand?
Loss of total surplus
ExplanationDeadweight loss is the reduction in total economic surplus due to market inefficiency.