#1
Which of the following is a determinant of supply?
Government policies
ExplanationGovernment policies can influence production costs, regulations, and incentives affecting supply.
#2
What does the law of demand state?
As the price of a good increases, the quantity demanded decreases
ExplanationThere's an inverse relationship between price and quantity demanded.
#3
What happens to the equilibrium price and quantity when demand increases and supply decreases?
Price increases; quantity increases
ExplanationShifts equilibrium towards higher price and quantity due to increased demand and reduced supply.
#4
What is the impact on equilibrium price and quantity when both demand and supply increase?
Price increases; quantity increases
ExplanationBoth factors push equilibrium price and quantity up.
#5
What is the concept of price elasticity of supply?
Measure of responsiveness of quantity supplied to a change in price
ExplanationIt quantifies how much quantity supplied changes in response to price fluctuations.
#6
What is a substitute good?
A good that is consumed in place of another good
ExplanationConsumers switch to substitutes when the price of a good increases.
#7
Which factor does NOT affect the elasticity of demand?
Government regulations
ExplanationElasticity of demand is determined by factors like necessity, availability of substitutes, and time, not by regulations.
#8
In a market with perfectly elastic demand, how does a change in price affect quantity demanded?
Quantity demanded remains constant
ExplanationDemand remains constant despite price changes.
#9
What is the income elasticity of demand for a normal good?
Positive
ExplanationFor normal goods, as income rises, demand increases, indicating a positive income elasticity.
#10
In a market with perfectly inelastic supply, how does a change in price affect quantity supplied?
Quantity supplied remains constant
ExplanationSupply doesn't change regardless of price fluctuations.
#11
In a market with perfectly elastic supply, how does a change in price affect quantity supplied?
Quantity supplied becomes zero
ExplanationSupply is infinitely responsive to price, so any price change leads to total quantity supplied being zero.