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Revision: Basics of Supply and Demand

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Questions and Answers

What is a perfectly competitive market characterized by?

Significant impact on price by a single buyer or seller

Many buyers and sellers with no significant impact on price (correct)

Absence of buyers or sellers

Limited number of buyers and sellers

In microeconomics, what does the demand curve represent?

Number of consumers willing to buy a good

Relationship between price and quantity demanded (correct)

Relationship between price and quantity supplied

Number of producers willing to sell a good

What is the supply curve in microeconomics related to?

Price of a good compared to income

Relationship between quantity supplied and price of a good (correct)

Number of buyers in the market

Quantity of a good that consumers are willing to buy

Which equation represents the relationship between quantity demanded and price in microeconomics?

$QD = QD(P)$ Signup and view all the answers

What is the assumption that consumers prefer to have more of any good or service than less?

More is better than less Signup and view all the answers

What does the assumption of transitivity state about consumer preferences?

If A is preferred over B and B is preferred over C, then A is preferred over C Signup and view all the answers

What does the slope of the budget line, ∆C/∆F, measure?

The relative cost of food and clothing Signup and view all the answers

What is the feature of indifference curves for perfect substitutes, according to the text?

MRS is constant Signup and view all the answers

In consumer preferences, what does the assumption of completeness allow consumers to do?

Compare and rank all possible baskets Signup and view all the answers

In the context of consumer choices, what does it mean if ∆C/∆F = -(PF/PC) = -1/2?

Half a unit of clothing must be given up for one more unit of food Signup and view all the answers

How do indifference curves look like for perfect complements based on the text?

MRS is infinite or zero whenever there is too much of one good relative to the other Signup and view all the answers

How is the relationship between quantity demanded and price represented in microeconomics?

Using market demand curves Signup and view all the answers

If income doubles while the prices of food and clothing remain constant, how would the budget line change?

It would shift outward parallel to the original line Signup and view all the answers

What happens to the budget line if both the income and prices for food and clothing double?

The intercept on the food axis decreases Signup and view all the answers