All?

Question 1

What is microeconomics?

Answer 1

A study of how households and firms behave and interact in the market.

Question 2

What are the two market forces studied in microeconomics?

Answer 2

• Demand
• Supply

Question 3

What does demand indicate?

Answer 3

Desire and ability to purchase.

Question 4

What are the two factors that affect demand?

Answer 4

• Price
• Non-price factors

Question 5

What causes movement along the demand curve?

Answer 5

Changes in price.

Question 6

What causes a shift of the demand curve?

Answer 6

Changes in non-price factors.

Question 7

Define quantity demanded.

Answer 7

The amount of good or service that people want and are able to buy at a given price.

Question 8

What are the two ways to represent demand?

Answer 8

• Demand Schedule
• Demand Curve

Question 9

What is the law of demand?

Answer 9

An increase in price will lead to a decrease in quantity demanded, ceteris paribus.

Question 10

What are the two effects of demand?

Answer 10

• Substitution Effect
• Income Effect

Question 11

What is the substitution effect?

Answer 11

A price increase of a good makes other goods look cheaper, leading to less demand for the good whose price increased.

Question 12

What is the income effect?

Answer 12

A price increase makes one’s income seem smaller, leading to less demand for goods.

Question 13

What causes changes in demand?

Answer 13

• Price
• Non-price factors

Question 14

What are non-price factors that affect demand?

Answer 14

• Change in income
• Change in the price of related goods
• Change in taste and preferences
• Change in expectations
• Change in the number of buyers

Question 15

What is supply?

Answer 15

Desire and ability to sell a product or service in a given period of time.

Question 16

Define quantity supplied.

Answer 16

The amount of good or service that firms want and are able to sell at a given price.

Question 17

What are the two ways to represent supply?

Answer 17

• Supply Schedule
• Supply Curve

Question 18

What is the law of supply?

Answer 18

An increase in price will lead to an increase in quantity supplied, ceteris paribus.

Question 19

What causes movement along the supply curve?

Answer 19

Changes in price.

Question 20

What are non-price factors that affect supply?

Answer 20

• Change in price of inputs
• Change in level of technology
• Change in prices of related goods
• Change in expectations
• Change in the number of firms

Question 21

What results from the interaction of demand and supply?

Answer 21

• Market Equilibrium
• Market Disequilibrium

Question 22

What is market equilibrium?

Answer 22

Quantity demanded equals quantity supplied.

Question 23

What happens during market disequilibrium?

Answer 23

There is a shortage or a surplus.

Question 24

What is equilibrium price?

Answer 24

The quantity of the good that buyers are willing and able to buy equals the quantity that sellers are willing and able to sell.

Question 25

What causes a right shift of the demand curve?

Answer 25

* Increase in income * Increase in demand due to change in taste or preference * Expectations * Increase in demand for a good due to a price increase of a related good

Question 26

What causes a left shift of the demand curve?

Answer 26

* Decrease in income * Decrease in demand due to change in taste or preference * Expectations * Decrease in demand for a good due to a price decrease of a related good

Question 27

What causes a right shift of the supply curve?

Answer 27

* Increase in number of suppliers * Decrease in cost of input * Better technology * Expectations * Increase in price of related goods

Question 28

What causes a left shift of the supply curve?

Answer 28

* Decrease in number of suppliers * Increase in cost of input * Obsolete technology * Expectations * Destruction due to calamities * Decrease in price of related goods