ECS1601 Assignment 5
(COMPLETE QUESTIONS
AND ANSWERS) 2024
Question 1: What is the law of demand?
Answer: The law of demand states that, all else being equal, as the price of a good decreases,
the quantity demanded by consumers increases, and vice versa. This inverse relationship
reflects consumers' willingness to buy more at lower prices due to the substitution effect and
income effect.
Question 2: Explain the concept of elasticity of demand.
Answer: Elasticity of demand measures how responsive the quantity demanded of a good is to
a change in its price. If demand is elastic (elasticity greater than 1), consumers will significantly
change their quantity demanded with a price change. Conversely, if demand is inelastic
(elasticity less than 1), quantity demanded changes little with price variations. Elasticity can be
influenced by factors such as the availability of substitutes and the proportion of income spent
on the good.
Question 3: What are the main differences between microeconomics and
macroeconomics?
Answer: Microeconomics focuses on individual consumers and firms, examining their decision-
making processes and how they interact in markets. It deals with concepts like supply and
demand, pricing, and consumer behavior.
Macroeconomics, on the other hand, looks at the economy as a whole. It studies aggregate
indicators such as GDP, unemployment rates, inflation, and national income. Macroeconomics
is concerned with overarching policies and economic growth.
Question 4: Define GDP and its importance in economics.
(COMPLETE QUESTIONS
AND ANSWERS) 2024
Question 1: What is the law of demand?
Answer: The law of demand states that, all else being equal, as the price of a good decreases,
the quantity demanded by consumers increases, and vice versa. This inverse relationship
reflects consumers' willingness to buy more at lower prices due to the substitution effect and
income effect.
Question 2: Explain the concept of elasticity of demand.
Answer: Elasticity of demand measures how responsive the quantity demanded of a good is to
a change in its price. If demand is elastic (elasticity greater than 1), consumers will significantly
change their quantity demanded with a price change. Conversely, if demand is inelastic
(elasticity less than 1), quantity demanded changes little with price variations. Elasticity can be
influenced by factors such as the availability of substitutes and the proportion of income spent
on the good.
Question 3: What are the main differences between microeconomics and
macroeconomics?
Answer: Microeconomics focuses on individual consumers and firms, examining their decision-
making processes and how they interact in markets. It deals with concepts like supply and
demand, pricing, and consumer behavior.
Macroeconomics, on the other hand, looks at the economy as a whole. It studies aggregate
indicators such as GDP, unemployment rates, inflation, and national income. Macroeconomics
is concerned with overarching policies and economic growth.
Question 4: Define GDP and its importance in economics.
