Exploring Microeconomics Principles

What is the law of demand?

• The law of demand indicates that quantity supplied increases as price decreases.

• The law of demand suggests that higher prices lead to higher demand.

• The law of demand states that price and quantity demanded are directly related.

• The law of demand indicates that price and quantity demanded are inversely related.

Explain the concept of elasticity in economics.

• Elasticity indicates the level of government intervention in markets.

• Elasticity is the measure of a country's economic growth rate.

• Elasticity refers to the total amount of goods produced in an economy.

• Elasticity measures the responsiveness of quantity demanded or supplied to changes in price or other factors.

What factors can cause a shift in the demand curve?

• Factors that can cause a shift in the demand curve include changes in consumer income, preferences, prices of related goods, expectations, and demographics.

• Technological advancements in production

• Changes in government regulations

• Natural disasters affecting supply

Define opportunity cost and provide an example.

• An example of opportunity cost is choosing to eat at home instead of dining out, which has no financial implications.

• Opportunity cost is the total cost of an item, including purchase price and maintenance.

• Opportunity cost refers to the benefits gained from a decision, not the costs associated with it.

• For example, if you spend $20 on a movie ticket instead of saving it, the opportunity cost is the potential interest you could have earned if you had saved that money.

What is the difference between a normal good and an inferior good?

• Normal goods see increased demand with rising income; inferior goods see decreased demand with rising income.

• Normal goods are always luxury items; inferior goods are always necessities.

• Normal goods decrease in demand with rising income; inferior goods increase in demand with rising income.

• Normal goods are only found in developed countries; inferior goods are only found in developing countries.

How do consumer preferences affect market demand?

• Consumer preferences only affect supply, not demand.

• Consumer preferences have no impact on market demand.

• Consumer preferences affect market demand by increasing or decreasing the desire for specific products.

• Market demand is solely determined by pricing, regardless of consumer preferences.

What is the role of prices in a market economy?

• Prices are solely based on production costs in a market economy.

• Prices act as signals and allocate resources in a market economy.

• Prices are fixed and do not change in a market economy.

• Prices determine the quality of goods in a market economy.

Explain the concept of marginal utility.

• Marginal utility is the extra satisfaction gained from consuming an additional unit of a good or service.

• Marginal utility is the average satisfaction derived from all units of a good.

• Marginal utility is the cost associated with producing one more unit of a good.

• Marginal utility refers to the total satisfaction from all units consumed.

What are the main characteristics of perfect competition?

• Differentiated products

• The main characteristics of perfect competition are: many buyers and sellers, homogeneous products, free entry and exit, perfect information, and price-taking behavior.

• Few buyers and sellers

• Restricted market entry

How does a price ceiling affect market equilibrium?

• A price ceiling raises prices to equilibrium levels.

• A price ceiling leads to an increase in supply.

• A price ceiling has no effect on market equilibrium.

• A price ceiling creates a shortage by preventing prices from reaching equilibrium.