Module 1
1. State the law of demand
When price goes up quantity demanded goes down
When price goes down quantity demanded goes up
Inverse relationship between price and quantity demanded
2. Define the law of supply
When price goes up quantity supplied goes up
When the price goes down quantity supplied goes down
Direct relationship
3. What is considered a "normal" good by economists?
Income goes up, demand goes up
4. What is the difference between the quantity demanded and the demand curve?
Any point in the demand curve is quantity demanded at that price, however the demand
curve is the total system that shifts to the left.
5. What is the reason why the quantity demanded of a good increase when its price falls?
Substitution effect, when price goes up a substitute that is cheaper will take its place
6. Define surplus and shortage
Shortage ; Demand higher than quantity dmeanded
Surplus = Demand lower than quantity demanded
7. Discuss factors that shift the demand curve
Change in preferences or taste
Number of consumers in the market
Income of consumer
8. Discuss factors that shift the supply curve
Cost of input being used for production: labor capital or raw materials
Number of suppliers.
Cost of production
9. Define market equilibrium
Is there is no shortage or surplus
Demand = supply stable point.
10. What does the demand curve show?
Negative relationship between price and quantity demanded.
, 11. If the supply of a product decreases and the demand for that product simultaneously
increases, then the equilibrium
Price goes up. Quantity will be determined on the magnitude of the shift .
Module 2
1. If the price decreases by 4 percent. As a result, the quantity demanded increases by 12
percent. The price elasticity of demand is…………
Elastic (greater than one is elastic, one is unit elastic, and less than one is inelastic)
Elastic = sensitive to change in price
Inelastic = insensitive to price changes
2. What is the relationship between elasticity and revenue?
Elastic = very responsive price increases total revenue decreases
Inelastic = Not that responsive to price changes. Total revenue goes up
Unit elastic = no change in revenue
3. A 7 percent reduction in the price of a product has zero effect on the dollar amount of
consumer expenditure on the product. The price elasticity of demand is………
Unit Elastic
4. What does the price elasticity of demand coefficient measure?
Responsiveness of consumers for any price Change.
5. What is characteristic of the demand for a commodity that is elastic or inelastic or unit
elastic?
Lost of substitutes = Demand is elastic no substitutes demand is inelastic
Less budget in household for that commodity means have inelastic demand
The more luxurious the product the more elastic the demand is
The more of a necessity the product is the more inelastic the demand is
Product use, single use will have inelastic demand while multi use products will be elastic
The more income demand is inelastic
6. What is unit elastic? When the price of a good goes up and demand is unit elastic, what
would happen to the total revenue? Revenue is not affected at all
7. What is the basic difference between the short run and the long run?
Short-run means the time frame at which at least one resource of production is fixed.
Long run means a time frame at which every source of production is variable.
8. What is the relationship between the total product and marginal product?
Total product = total number of production. marginal product means the additional product. By
adding a single worker.
9. What is the relationship between the total cost concept and average cost concepts? For
instance, if you know TC and Quantity, how do you calculate Average Total Cost?
Total (variable, fixed, total cost) / quantity = Average total (variable, fixed, total) cost
10. What is the vertical distance between Total Cost and Total Variable Cost?
Total Fixed cost This is because ATC = AFC + AVC.
1. State the law of demand
When price goes up quantity demanded goes down
When price goes down quantity demanded goes up
Inverse relationship between price and quantity demanded
2. Define the law of supply
When price goes up quantity supplied goes up
When the price goes down quantity supplied goes down
Direct relationship
3. What is considered a "normal" good by economists?
Income goes up, demand goes up
4. What is the difference between the quantity demanded and the demand curve?
Any point in the demand curve is quantity demanded at that price, however the demand
curve is the total system that shifts to the left.
5. What is the reason why the quantity demanded of a good increase when its price falls?
Substitution effect, when price goes up a substitute that is cheaper will take its place
6. Define surplus and shortage
Shortage ; Demand higher than quantity dmeanded
Surplus = Demand lower than quantity demanded
7. Discuss factors that shift the demand curve
Change in preferences or taste
Number of consumers in the market
Income of consumer
8. Discuss factors that shift the supply curve
Cost of input being used for production: labor capital or raw materials
Number of suppliers.
Cost of production
9. Define market equilibrium
Is there is no shortage or surplus
Demand = supply stable point.
10. What does the demand curve show?
Negative relationship between price and quantity demanded.
, 11. If the supply of a product decreases and the demand for that product simultaneously
increases, then the equilibrium
Price goes up. Quantity will be determined on the magnitude of the shift .
Module 2
1. If the price decreases by 4 percent. As a result, the quantity demanded increases by 12
percent. The price elasticity of demand is…………
Elastic (greater than one is elastic, one is unit elastic, and less than one is inelastic)
Elastic = sensitive to change in price
Inelastic = insensitive to price changes
2. What is the relationship between elasticity and revenue?
Elastic = very responsive price increases total revenue decreases
Inelastic = Not that responsive to price changes. Total revenue goes up
Unit elastic = no change in revenue
3. A 7 percent reduction in the price of a product has zero effect on the dollar amount of
consumer expenditure on the product. The price elasticity of demand is………
Unit Elastic
4. What does the price elasticity of demand coefficient measure?
Responsiveness of consumers for any price Change.
5. What is characteristic of the demand for a commodity that is elastic or inelastic or unit
elastic?
Lost of substitutes = Demand is elastic no substitutes demand is inelastic
Less budget in household for that commodity means have inelastic demand
The more luxurious the product the more elastic the demand is
The more of a necessity the product is the more inelastic the demand is
Product use, single use will have inelastic demand while multi use products will be elastic
The more income demand is inelastic
6. What is unit elastic? When the price of a good goes up and demand is unit elastic, what
would happen to the total revenue? Revenue is not affected at all
7. What is the basic difference between the short run and the long run?
Short-run means the time frame at which at least one resource of production is fixed.
Long run means a time frame at which every source of production is variable.
8. What is the relationship between the total product and marginal product?
Total product = total number of production. marginal product means the additional product. By
adding a single worker.
9. What is the relationship between the total cost concept and average cost concepts? For
instance, if you know TC and Quantity, how do you calculate Average Total Cost?
Total (variable, fixed, total cost) / quantity = Average total (variable, fixed, total) cost
10. What is the vertical distance between Total Cost and Total Variable Cost?
Total Fixed cost This is because ATC = AFC + AVC.
