Q1. If the price of a substitute good increases, what happens to the demand for the original good?
Solution:
If the price of a substitute good increases, consumers will likely buy more of the original good, increasing its demand.
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Q2. What is the law of supply?
Solution:
The law of supply states that there is a direct relationship between price and quantity supplied; as price increases, quantity supplied also increases.
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Q3. Which of the following factors can cause a shift in the demand curve?
Solution:
A change in consumer income can lead to a shift in the demand curve, as higher income typically increases demand for normal goods.
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Q4. What is the term for a market structure with many buyers and many sellers?
Solution:
Perfect competition is characterized by many buyers and many sellers in the market.
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Q5. What effect does an increase in consumer preferences for a product have on its demand?
Solution:
An increase in consumer preferences for a product typically leads to an increase in demand for that product.
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Q6. Which of the following is NOT a determinant of supply?
Solution:
Consumer income is a determinant of demand, not supply.
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Q7. If there is a surplus of a product in the market, what is likely to happen to its price?
Solution:
In the case of a surplus, suppliers will lower the price to encourage more sales, leading to a decrease in price.
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Q8. What is the primary focus of microeconomics?
Solution:
Microeconomics primarily focuses on individual markets and the behavior of consumers and firms within those markets.
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Q9. What is the term for the point where the supply and demand curves intersect?
Solution:
The point where the supply and demand curves intersect is called the equilibrium, where quantity supplied equals quantity demanded.
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Q10. What is a market equilibrium?
Solution:
Market equilibrium occurs when the quantity supplied equals the quantity demanded at a certain price.
