#1
Which of the following best describes the law of demand?
As the price of a good decreases, the quantity demanded increases.
ExplanationInverse relationship between price and quantity demanded.
#2
What does the supply curve illustrate?
The relationship between price and quantity supplied.
ExplanationRelationship between price and quantity supplied.
#3
What happens to equilibrium price and quantity when demand increases and supply decreases?
Equilibrium price increases, equilibrium quantity decreases.
ExplanationPrice rises, quantity falls due to scarcity.
#4
Which of the following factors does NOT cause a shift in the demand curve?
Change in the price of the good itself.
ExplanationPrice change doesn't shift the curve, it moves along it.
#5
What does the term 'price elasticity of demand' measure?
The percentage change in quantity demanded for a percentage change in price.
ExplanationSensitivity of quantity demanded to price variations.
#6
If the cross-price elasticity of demand between two goods is negative, what does it indicate?
The goods are complements.
ExplanationInverse relationship between goods' prices.
#7
What does the income elasticity of demand measure?
The percentage change in quantity demanded for a percentage change in income.
ExplanationSensitivity of demand to income fluctuations.
#8
What is the concept of elasticity of supply?
It measures the responsiveness of quantity supplied to a change in price.
ExplanationDegree of responsiveness in supply to price changes.
#9
What is the main determinant of the price elasticity of supply?
Time period considered.
ExplanationImpact of time horizon on supply responsiveness.
#10
What happens to equilibrium price and quantity if both demand and supply increase by the same proportion?
Equilibrium price remains the same, equilibrium quantity increases.
ExplanationPrice stability, increased quantity due to dual demand and supply growth.
#11
If a good has a perfectly inelastic demand, what is the price elasticity of demand?
Zero
ExplanationNo change in quantity demanded despite price shifts.
#12
What does it mean when demand is said to be elastic?
Consumers are highly responsive to price changes.
ExplanationLarge change in quantity demanded due to price shifts.