ECONOMICS UNIT 1 MARKET SYSTEM

What is the law of demand?

• The law of demand states that as the price of a good or service increases, the quantity demanded increases.

• The law of demand states that as the price of a good or service decreases, the quantity demanded decreases.

• The law of demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa.

• The law of demand states that as the price of a good or service increases, the quantity demanded remains constant.

Explain the concept of market equilibrium.

• Market equilibrium is achieved when there is no competition among producers.

• Market equilibrium occurs when demand exceeds supply in a market.

• Market equilibrium is the balance between supply and demand in a market, where the quantity of a product demanded by consumers equals the quantity supplied by producers, leading to a stable price.

• Market equilibrium is when the price of a product is determined solely by the producers.

Define price elasticity of demand.

• Price elasticity of demand is the responsiveness of the quantity demanded of a good to a change in its price.

• Price elasticity of demand is the quantity of a good demanded at a specific price point.

• Price elasticity of demand is the total revenue generated from selling a product.

• Price elasticity of demand is the measure of how much a consumer is willing to pay for a product.

What is income elasticity of demand and how is it calculated?

• Income elasticity of demand = (% Change in Quantity Demanded) / (% Change in Income)

• Income elasticity of demand = (% Change in Quantity Demanded) * (% Change in Income)

• Income elasticity of demand = (% Change in Price) / (% Change in Quantity Demanded)

• Income elasticity of demand = (% Change in Quantity Supplied) / (% Change in Income)

Describe the characteristics of a mixed economy.

• A mixed economy does not involve any government intervention.

• A mixed economy allows for private ownership only in certain sectors.

• A mixed economy combines elements of both capitalism and socialism, allowing for private ownership and government intervention in certain sectors.

• A mixed economy is solely based on socialism principles.

What is privatization and why is it implemented?

• Privatization is implemented to increase government control and bureaucracy.

• Privatization is implemented to improve efficiency, reduce government spending, increase competition, and promote innovation.

• Privatization is implemented to reduce efficiency and innovation.

• Privatization is implemented to hinder economic growth and stifle competition.

Discuss the concept of externalities in economics.

• Externalities are only positive impacts of an economic activity.

• Externalities in economics are the impact of an economic activity on a third party who is not directly involved in the activity.

• Externalities do not affect any parties outside of the direct participants in an economic activity.

• Externalities are only relevant in microeconomics, not macroeconomics.

What is the basic economic problem and how does it impact society?

• The basic economic problem is overabundance, which leads to resource waste in society.

• The basic economic problem is scarcity, which impacts society by requiring choices to be made regarding resource allocation.

• The basic economic problem is inflation, which causes prices to rise and impacts society negatively.

• The basic economic problem is unemployment, which results in a surplus of resources in society.

How does an increase in supply affect the market equilibrium?

• Prices increase and quantity decreases

• Prices decrease and quantity increases

• Prices increase and quantity stays the same

• Prices stay the same and quantity decreases

Explain the concept of negative externalities and provide examples.

• Negative externalities are benefits received by third parties not involved in a transaction.

• Negative externalities only occur in perfectly competitive markets.

• Examples of negative externalities include healthcare and education.

• Negative externalities refer to the costs imposed on third parties not involved in a transaction, such as pollution or noise from certain activities.