CSET Social Science Subtest 3:
Economics Questions And Answers
With Verified Solutions Latest Updated
2025
Microeconomics:
1. What is microeconomics?
Answer: The study of the economic behavior and decision-making of small
units, such as individuals, families, and businesses.
2. What does demand refer to?
Answer: Consumer willingness and ability to buy products.
3. What is the Law of Demand?
Answer: As price increases, quantity demanded decreases.
4. What is real income?
Answer: Income adjusted for inflation.
5. What is the real income effect?
Answer: An economic rule stating that individuals cannot keep buying the
same quantity of a product if its price rises while their income stays the
same.
6. What is the substitution effect?
Answer: An effect caused by a rise in price that induces a consumer (whose
income has remained the same) to buy more of a relatively lower-priced
good and less of a higher-priced one.
7. What is diminishing marginal utility?
Answer: Decreasing satisfaction or usefulness as additional units of a
product are acquired.
8. What is price elasticity of demand?
Answer: A measure of how much consumers respond to a price change.
9. What does it mean for demand to be elastic?
Answer: Demand that is very sensitive to a change in price.
, 10.What does inelastic demand mean?
Answer: Describes demand that is not very sensitive to a change in price.
11.What is the Law of Supply?
Answer: As price increases, quantity supplied increases.
12.What are the factors of supply?
Answer: 1. Price of Inputs
13.Number of Firms
14.Taxes
15.Technology
16.What is the equilibrium price?
Answer: The point where the quantity of demand and the quantity supplied
meet.
17.What is a shortage?
Answer: A situation where quantity supplied is less than quantity demanded
at a given price, causing the price to rise.
18.What is a surplus?
Answer: A situation in which quantity supplied is greater than quantity
demanded, causing the price to drop.
19.What is a price ceiling?
Answer: A legal maximum on the price at which a good can be sold. Often
leading to shortages.
20.What is a price floor?
Answer: Prevents prices from dropping too low, such as minimum wage.
Often leading to surpluses.
21.What is perfect competition?
Answer: The situation prevailing in a market where buyers and sellers are so
numerous and well-informed that all elements of monopoly are absent, and
the market price is beyond the control of individual buyers and sellers.
22.What is imperfect competition?
Answer: When any of the elements for a successfully competitive market
are weak or lacking.
Economics Questions And Answers
With Verified Solutions Latest Updated
2025
Microeconomics:
1. What is microeconomics?
Answer: The study of the economic behavior and decision-making of small
units, such as individuals, families, and businesses.
2. What does demand refer to?
Answer: Consumer willingness and ability to buy products.
3. What is the Law of Demand?
Answer: As price increases, quantity demanded decreases.
4. What is real income?
Answer: Income adjusted for inflation.
5. What is the real income effect?
Answer: An economic rule stating that individuals cannot keep buying the
same quantity of a product if its price rises while their income stays the
same.
6. What is the substitution effect?
Answer: An effect caused by a rise in price that induces a consumer (whose
income has remained the same) to buy more of a relatively lower-priced
good and less of a higher-priced one.
7. What is diminishing marginal utility?
Answer: Decreasing satisfaction or usefulness as additional units of a
product are acquired.
8. What is price elasticity of demand?
Answer: A measure of how much consumers respond to a price change.
9. What does it mean for demand to be elastic?
Answer: Demand that is very sensitive to a change in price.
, 10.What does inelastic demand mean?
Answer: Describes demand that is not very sensitive to a change in price.
11.What is the Law of Supply?
Answer: As price increases, quantity supplied increases.
12.What are the factors of supply?
Answer: 1. Price of Inputs
13.Number of Firms
14.Taxes
15.Technology
16.What is the equilibrium price?
Answer: The point where the quantity of demand and the quantity supplied
meet.
17.What is a shortage?
Answer: A situation where quantity supplied is less than quantity demanded
at a given price, causing the price to rise.
18.What is a surplus?
Answer: A situation in which quantity supplied is greater than quantity
demanded, causing the price to drop.
19.What is a price ceiling?
Answer: A legal maximum on the price at which a good can be sold. Often
leading to shortages.
20.What is a price floor?
Answer: Prevents prices from dropping too low, such as minimum wage.
Often leading to surpluses.
21.What is perfect competition?
Answer: The situation prevailing in a market where buyers and sellers are so
numerous and well-informed that all elements of monopoly are absent, and
the market price is beyond the control of individual buyers and sellers.
22.What is imperfect competition?
Answer: When any of the elements for a successfully competitive market
are weak or lacking.
