Important Questions and Answers: Basic Economics

BASIC ECONOMICS

1. What is meant by economics?

Economics is a study of economic problems of the people concerning production, consumption, exchange and distribution of wealth.

2. What is micro economics?

Micro economics is the study of a particular household, individual price, a firm or an industry.

3. What is macro economics?

Macro economics analyses the behaviour of broad economic aggregate like national income, general income, and general price level. etc.

4. What sort of relationship exists between the demand for goods and the price of complementary goods?

The relationship between the demand for goods and the price of complementary goods is inverse. when the price of complementary goods falls its demand would increase. it would increase the demand for goods as they are going to be used along with the complementary goods.

5. State the law of diminishing marginal utility.

It states that with successive increase in the units of consumption of a commodity, every additional unit of that commodity gives lesser satisfaction to the consumer. consumption beyond point of safety.

6. What are the assumptions of law of demand?

a) Price of related goods remains constant.

b) Income of the consumer does not change

c)  Taste and preferences of the people remain unchanged.

7. What are the factors which affect the price elasticity of demand for a commodity?

a) Nature of the commodity

b)Availability of substitutes

c) Share in the total expenditure d) Different uses of a commodity

8. State the assumption of the law of supply.

a)Price of related goods remains unchanged. b)Technology of production should not changed

c)  Cost of factors of production should remain the same

d) Goals of the firm should not change

9. Give any three factors affecting elasticity of supply

a) Nature of commodity

b) Cost of production

c) Time element

10.Define market demand.

Market demand is the total quantity demanded by all the purchasers together.

11. State the law of supply

The law of supply states that the quantity of a commodity supplied varies directly with the price, other determinants of supply remaining constant.

12. What is fixed cost?

Fixed costs are the cost which does not change with change in the level of output.

13. Define marginal cost.

Marginal cost is the change in the total cost by producing an additional unit of output

14. State & explain the law of demand

The law of demand states that other things being equal demand when price falls and contracts when price rises.

15. Why does the demand curve slope downwards to the right?

A normal demand curve slopes downwards from left to right and it means that more units of a good are brought when price falls and less number of units are brought when rises. That is, when price falls, demand expands. So the demand curve as a rule, slope downwards from left to right.

16. Define cross elasticity of demand.

Cross elasticity of demand is the responsiveness of demand for a commodity say X to a given change in the price of a related say Y.

17. Classify  wants.    a)

Necessaries

b)     Comforts   c)

Luxuries

18. Name the factors influencing demand.

1   Changes in the price of other goods.

a    State of trade

c)  Changes in  the  taste and  fashion  d)

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19. What is demand forecasting?

Demand forecasting is the estimate of level of demand to be expected for goods or services for some period of time in the future.

20. What is meant by supply in economics?