Economics MCQ Questions and Solutions with Explanations | Commerce

Elasticity of supply refers to the degree of responsiveness of supply of a commodity to changes in its Price. Elasticity of supply measures the degree of responsiveness of quantity supplied to a change in own price of the commodity. It is also defined as the percentage change in quantity supplied divided by percentage change in price.

When demand is perfectly inelastic, an increase in price will result in an increase in total revenue.

The cost on one thing in terms of the alternative given up is known as Opportunity cost. Opportunity cost is an economics term that refers to the value of what you have to give up in order to choose something else.

When equilibrium price rises but equilibrium quantity remains unchanged, the cause is supply decreases and demand increases. As price increases, it serves as an incentive for suppliers to increase supply and also leads to a fall in demand. It is important to realize that these processes continue to operate until a new equilibrium is established.

If demand is unitary elastic, a 25% increase in price will result in 25% decrease in quantity demanded.

Contraction of demand is the result of Increase in the price of the commodity concerned. The demand for a commodity changes due to a change in price. It is called extension and contraction of demand. When there is decrease in price of commodity there is in increase in demand of that commodity.

According to M. Kalecki, the true measure of the degree of monopoly power is the Ratio between price and marginal cost. Monopoly is the form of market organisation in which there is a single fir m selling a commodity for which there are no close substitutes.

Price of a product is determined in a free market by both demand and supply. In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded (at the current price) will equal the quantity supplied (at the current price), resulting in an economic equilibrium for price and quantity transacted.

When cross elasticity of demand is a large positive number, one can conclude that the good is complement. Two goods that complement each other have a negative cross elasticity of demand: as the price of good Y rises, the demand for good X falls.

Only price changes and all others like price of related goods, income, taste and preference remain constant, while drawing an individual's Demand curve for a commodity.