#1
What does the law of demand state?
As price decreases, quantity demanded decreases.
ExplanationPrice and quantity demanded have an inverse relationship.
#2
Which factor does NOT influence demand?
Number of suppliers
ExplanationNumber of suppliers affects supply, not demand.
#3
What is a substitute good?
A good that can be used in place of another good.
ExplanationOne good can replace another in consumption.
#4
What is a complementary good?
A good that is consumed in conjunction with another good.
ExplanationGoods consumed together; if one increases, demand for the other may also increase.
#5
What is a luxury good?
A good with an income elasticity greater than 1.
ExplanationGoods whose demand increases more than proportionally as income rises.
#6
What is elasticity?
A measure of how much a change in price affects quantity demanded or supplied.
ExplanationExtent to which demand or supply responds to changes in price.
#7
What is a perfectly elastic demand?
Demand that is infinitely responsive to price changes.
ExplanationAny change in price leads to an infinite change in quantity demanded.
#8
What does the law of supply indicate?
As price increases, quantity supplied increases.
ExplanationPrice and quantity supplied have a direct relationship.
#9
What is the price elasticity of demand?
A measure of how much quantity demanded changes in response to a change in price.
ExplanationDegree of responsiveness of quantity demanded to price changes.
#10
What happens to equilibrium price and quantity when both demand and supply increase?
Price increases, quantity increases
ExplanationBoth price and quantity increase.
#11
What is the cross-price elasticity of demand?
A measure of how much quantity demanded changes in response to a change in price of another good.
ExplanationDegree of responsiveness of quantity demanded of one good to a change in price of another good.
#12
What does the income elasticity of demand measure?
A measure of how much quantity demanded changes in response to a change in consumer income.
ExplanationSensitivity of quantity demanded to changes in income.
#13
What is a market equilibrium?
When quantity demanded equals quantity supplied.
ExplanationBalanced state where supply meets demand.
#14
Which factor does NOT affect the price elasticity of demand?
Market share of the supplier
ExplanationMarket share of the supplier is irrelevant to demand elasticity.
#15
What is the concept of consumer surplus?
The difference between the minimum price a consumer is willing to pay and the price they actually pay.
ExplanationBenefit consumers gain by paying less than their maximum willingness to pay.
#16
What is a Giffen good?
A good with a negative income elasticity.
ExplanationDemand for the good increases as its price rises due to income effects.
#17
What is the concept of producer surplus?
The difference between the minimum price a producer is willing to accept and the price they actually receive.
ExplanationBenefit producers gain by selling at a price higher than the minimum they would accept.
#18
What is the difference between a change in supply and a change in quantity supplied?
A change in supply results from a change in any factor other than price, while a change in quantity supplied results from a change in price.
ExplanationFactors other than price affect supply, whereas price changes affect quantity supplied.