#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
Which of the following situations would lead to an increase in the price of a good?
An increase in production costs.
ExplanationCostlier production leads to higher prices.
#9
What is the effect of a price ceiling below the equilibrium price?
It creates excess demand.
ExplanationShortage due to price restriction.
#10
What is the concept of consumer surplus?
The difference between the price a consumer is willing to pay and the price they actually pay.
ExplanationBenefit gained by consumers from paying less than they'd be willing to.
#11
What is the effect of a subsidy on producers?
Decrease in costs of production
ExplanationLower production expenses due to financial aid.
#12
What does the price elasticity of demand measure?
The responsiveness of quantity demanded to a change in price
ExplanationDegree of demand change in response to price variation.
#13
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.
#14
What is the main determinant of the price elasticity of supply?
Time period considered.
ExplanationImpact of time horizon on supply responsiveness.
#15
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.
#16
If a good has a perfectly inelastic demand, what is the price elasticity of demand?
Zero
ExplanationNo change in quantity demanded despite price shifts.
#17
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.
#18
What is the impact of a subsidy on equilibrium price and quantity?
Equilibrium price decreases, equilibrium quantity increases.
ExplanationPrice drop, quantity rise due to incentive.
#19
In the long run, what happens to the supply curve of a good if there is an increase in demand?
The supply curve shifts to the right.
ExplanationIncreased supply to meet heightened demand over time.
#20
What is the slope of the demand curve when demand is perfectly inelastic?
Zero
ExplanationHorizontal demand curve, no change in quantity.
#21
What happens to equilibrium price and quantity when both demand and supply increase?
Equilibrium price and quantity both increase.
ExplanationIncreased price and quantity due to dual demand and supply growth.
#22
What is the effect of a technological advancement on supply?
It shifts the supply curve to the right.
ExplanationIncreased supply due to improved technology.
#23
If the demand for a good is inelastic, how does a decrease in price affect total revenue?
Total revenue remains constant
ExplanationPrice drop doesn't significantly alter total revenue.
#24
What is the impact of an increase in both demand and supply on equilibrium quantity?
Equilibrium quantity increases
ExplanationIncreased equilibrium quantity due to dual demand and supply growth.
#25
What does the price elasticity of supply measure?
The responsiveness of quantity supplied to a change in price
ExplanationDegree of supply change in response to price variation.