Week 1

Question 1

Two key principles of Microeconomics

Answer 1

1. Optimization

2. Equilibrium

Question 2

Perfect competition:

Answer 2

1. Many, small & independent buyers and sellers: sellers and buyers are price takers
2. Homogenous product of known quality
3. Perfect information about price

Question 3

Giffen good

Answer 3

a product that people consume more of as the price rises and vice versa—violating the basic law of demand in microeconomics.

Question 4

Supply & demand curves illustrate:

Answer 4

Price-quantity relations, holding everything else constant

Question 5

Supply curve shifts due to changes in:

Answer 5

Technology, input prices, policies etc.

Question 6

Demand curve shifts due to changes in:

Answer 6

Incomes, taxes, prices of substitute or complement good, expectations about future.