Basic concepts
examines the behaviour of individual decision making units in a economy
microeconomics
A rise in price results in fall in demand
Law of demand
These are the free forces that coordinates the market without government intervention as mentioned in Adam Smith's invisible hand
demand and supply
Policy government uses to reduce cost of production for the producers
provision of subsidy
Indirect taxes shift the supply curve
True
Inputs used to produce goods and services wanted by people
Factors of production
The more we consume something the less we want of it
marginal utility
The gap in demand and supply that arises from a price ceiling
shortages
The minimum price of labour that a producer must pay as per law
Minimum wages
Indirect taxes lead to welfare loss
True
A good that is not scarce and therefore has zero opportunity cost
free goods
The substitution effect and income effect adds up to explain this law
Law of demand
Social surplus or welfare benefits that are lost to society because resources are not allocated efficienty
dead weight loss
Payment of this reduces the income of the consumers to be spent on goods and services- a leakage
Tax
Price floors give rise to shortages
False
Method used to apportion or divide something up between its interested users
Rationing
Cost of production, technology, prices of joint goods
non-price determinant of suuply
Consumer surplus when elasticity of demand is inelastic
Infinity
A fixed amount of tax per unit of the good or service sold
Specific taxes
Buying and selling transactions that go unrecorded and are often illegal exist in unorganised economy
False.
Parts of the national income that is not spent on goods and services.
leakages
additional cost of producing one more unit of output.
marginal cost
The curve that illustrates the YEDs of a product
Engel curve
The amount of tax increases as the price of the good or service increases
ad valorem
A higher tax burden leads to higher percentage of GDP taken away as tax
True