Introduction

Question 1

Definition of Price Mechanism

Answer 1

The use of price signals to allocate scarce resources among competing uses

Question 2

Prices are determined by…

Answer 2

The interaction of demand and supply
(Theory of demand and supply)

Question 3

Theory of demand explains

Answer 3

The behaviour of consumers

Question 4

Theory of supply explains

Answer 4

Behaviour of producers

Question 5

Definition of Law of Diminishing Marginal Utility (LDMU)

Answer 5

It states that beyond a certain point of consumption, as more and more units of a good or service are consumed, the additional utility derived from each additional unit consumed will fall.

Question 6

Based on Marginalist Principle, they will consider…

Answer 6

Price (Marginal cost) = Marginal Benefit

Question 7

Individual demand

Answer 7

Demand of one consumer

Question 8

How does an individual demand curve look like?

Answer 8

• Downwards sloping
• Reflective of Law of Demand

Question 9

What is market demand?

Answer 9

the sum of the individual demand schedules of all consumers in the market