Micro 1.2

Question 1

What is demand?

Answer 1

the quantity of a good or service that consumers are willing and able to buy at a given price in a given period of time

Question 2

What is supply?

Answer 2

the quantity of a good or service that a business are willing and able to sell at a given price in a given period of time

Question 3

What is the equilibrium price?

Answer 3

the price at which demand for a good or service equals the supply

Question 4

What is effective demand?

Answer 4

A desire for a good or service backed up by the ability to pay

Question 5

What is market demand?

Answer 5

The quantity of a good or a service that all the consumers in a market are willing and able to buy at different market prices

Question 6

What is the basic law of demand?

Answer 6

The basic law of demand is that demand varies inversely with price

Question 7

What is the income effect?

Answer 7

A fall in price increases the real purchasing power of consumers

Question 8

What is the substitution effect?

Answer 8

A fall in the price of a good makes it relatively cheaper compared to its substitutes

Question 9

What is utility?

Answer 9

The measure of satisfaction that we get from purchasing and consuming a good or service

Question 10

What is total utility?

Answer 10

The total satisfaction from a given level of consumption

Question 11

What is marginal utility?

Answer 11

The change in satisfaction from consuming an extra unit

Question 12

What is derived demand?

Answer 12

The demand for a factor of production used to produce another good or service

Question 13

What is composite demand?

Answer 13

When a good has more than one use and a increase in the demand for one product leads to a fall in the supply available of the other

Question 14

What is a normal good?

Answer 14

A good for which demand increases as income rises

Question 15

What is an inferior good?

Answer 15

A good for which demand decreases as income rises

Question 16

What is joint demand?

Answer 16

When you need two or more goods because they work together to provide benefit for a consumer

Question 17

What is competitive demand?

Answer 17

The demand for products which have close substitutes

Question 18

What is the basic law of supply?

Answer 18

The basic law of supply is that as the price of a product rises businesses will expand supply to the market

Question 19

What is joint supply?

Answer 19

Where the increase or decrease in the supply of one good leads to an increase or decrease in the supply of a by-product

Question 20

What is consumer surplus?

Answer 20

The difference between a consumer is willing to pay vs what they have to pay

Question 21

What is producer surplus?

Answer 21

The difference between the market price and the price which they are willing to supply

Question 22

What is the market clearing price?

Answer 22

The intersection of supply and demand

Question 23

What is a direct tax?

Answer 23

A tax that are paid directly by an individual or business to the government

Question 24

What type of tax is an income tax, corporation tax and capital gains tax?

Answer 24

A direct tax

Question 25

What is an indirect tax?

Answer 25

A tax imposed on producers by the government

Question 26

What type of tax is a duties tax?

Answer 26

An indirect tax

Question 27

Why might government impose an indirect tax?

Answer 27

To reduce the consumption or production of a good

Question 28

Why do businesses want to push tax onto the consumers?

Answer 28

To reduce the costs of production

Question 29

What does the ultimate incidence of tax depend on?

Answer 29

The PED and PES