MODULE 1

Question 1

It is the mother of economics

Answer 1

SCARCITY

Question 2

2. True or False: Economics will not exist if the resources are infinite

Answer 2

TRUE

Question 3

3. Deals with the efficient allocation of resources to satisfy unlimited human wants and needs.

Answer 3

ECONOMICS

Question 4

4. True or false: People make trade-offs because they can’t have everything.

Answer 4

TRUE

Question 5

5. A trade-off that implies that if a society produce more cars, it must produce fewer of another goods/ services

Answer 5

WHICH GOODS TO PRODUCE

Question 6

6. A trade-off that implies that a firm must use more of one input if it uses less of another input. Example: Cookies and Cracker manufacturing changes cooking oil (palm oil or coconut oil depending on which is cheaper)

Answer 6

HOW TO PRODUCE

Question 7

7. A trade off that implies that the more you get goods/services, someone else will get fewer/lesser

Answer 7

FOR WHOM TO PRODUCE/ WHO GETS THE GOODS/SERVICES

Question 8

8. It is where interactions of consumers, firms, and government happen/occur. Also, price-determinant

Answer 8

MARKET

Question 9

9. It is used by the economists to explain how firm allocates their resources and how market price is determined. It is also used to describe the relationship b/w two or more economic variables, and also to predict the change of one variable to another.

Answer 9

ECONOMIC MODEL

Question 10

10. Give the 6 economic models assumptions.

Answer 10

1. Simplify things.
2. Empirically tested predictions
3. Involves maximizing something relative to resource constraints
4. Used to make positive economics
5. Truth of positive economics can be tested
6. Normative economics contains a value judgement that can be tested

Question 11

11. It seeks how resources are in fact allocated in an economy. It only indicates that we can test the truth about the statement. “what will happen”

Answer 11

Positive economics

Question 12

It is a use of economic theory that tells about what should be done. It is concerns what somebody believes should happen.

Answer 12

Normative economics

Question 13

13. Give the 3 microeconomic models uses.

Answer 13

Predict individual, firm, and government decisions

Question 14

14. What is the slope of “Law of Demand”?

Answer 14

downward sloping

Question 15

15. Factors that affect Qd

Answer 15

own price, consumers taste/preference, price of substitute and complements, income, information, government, etc

Question 16

What happen when the price of the goods change?

Answer 16

movement along the demand curve

Question 17

A change in income, tastes, or another factor that affects demand other than price causes___?

Answer 17

Shifting of the demand curve

Question 18

How to get total demand?

Answer 18

Total demand = demand 1 + demand 2 + …. Demand N

Question 19

What is the slope of supply?

Answer 19

Upward sloping – indicates that higher price means increase in supply

Question 20

. It is the intersection of the demand and supply curve.

Answer 20

Market equilibrium

Question 21

When to Use the Supply-and-Demand Model.

Answer 21

applicable only in markets with many buyers and sellers; identical goods; certainty and full information about price, quantity, quality, incomes, costs, and other market characteristics; and low transaction costs. AKA PERFECT COMPETITION

Question 22

Sensitivities of the consumers to the change of a price.

Answer 22

Price Elasticity

Question 23

Give the elasticity table:

Answer 23

E = 0 Perfectly inelastic
E < 1 Inelastic
E = 1 Unit Elastic
E > 1 Elastic
E = ∞ Perfectly elastic
Note: Elasticity of demand is negative implying a inverse relationship of demand and price. To get the elasticity, get the absolute value first.

Question 24

Give the other types of Demand Elasticity

Answer 24

Cross-price elasticity =% price change of good B to good A

Income Elasticity = %change of income relative to good A

Question 25

What is the demand elasticity where consumer can substitute goods more readily in the long run?

Answer 25

Long run demand curves are more elastic than short run demand curves. if goods can be stored easily, short-run demand curves are more elastic than long-run curves.

Question 26

. It is the percentage change in the quantity supplied in response to a given percentage change in price.

Answer 26

Price elasticity of supply

Question 27

What happen if the firm can increase output in the long run than in the short run?

Answer 27

the long run elasticity of supply is greater than the short-run elasticity.

Question 28

Type of tax that government collects as fixed percent of the price per unit. “Lump sum tax”

Answer 28

Ad valorem tax.

Question 29

Type of tax by w/c the government collects a fixed amount per UNIT SOLD.

Answer 29

Specific tax or Per unit tax

Question 30

True or false: In an unregulated market, higher rents increase quantity supplied.

Answer 30

True. This is because if there is no government intervention, higher rents will encourage firms to build more houses.

Question 31

True or false: Buyer always pays a larger fraction of sales tax than sellers

Answer 31

False. Especially if the goods were elastic, imposing higher tax percentage to consumers will discourage the to buy it. Examples are car, if the tax are imposed solely on the consumer, consumers tend to not buy the product and seek alternatives.

Question 32

It means that quantity demanded will increase to infinity when the price decreases, and quantity demanded will decrease to zero when price increases.

Answer 32

Perfectly elastic demand

Question 33

The more elastic demand is for a product, the larger is the fraction of a sales tax paid by consumers

Answer 33

False