The law of demand states that there is a negative, or inverse, relationship between the price of a good and the quantity of that good demanded (assuming that all other factors stay unchanged). In our case, if the price of the toasts sold at the canteen decreases, the number of the toasts will increase. This inverse relationship indicates that the demand curves slope downward. That is, they are normally convex to the origin. The correct answer is B.

Ceteris Paribus is a Latin phrase, which means “other things being equal.” It is used in economics to state that all variables other than the one studied are assumed to be constant or fixed. The correct answer is Choice A.

There are two types of markets: product markets and factor markets. In product markets, all sorts of goods and services from cars to movie tickets are bought and sold. They refer to the market for the final goods themselves; however, factor markets are concerned with markets for factors of production or input in a production process, such as land, labor and capital. When you are offered a consumer loan, you are in a capital market. When you try to get a job, you are in a labor market. If you want to buy a piece of land or house by the Aegean coast for your retirement, then you are a participant in the land market or real estate market. The correct answer is Choice A.

With the assumption that income and Py remain constant, an inrease in Px from 1$ to 2$ increases the absoluate value of the slope of the budget line—leading to an inward tilt or
getting steepe. The answer is A.

Elasticity, in general, is used to quantify the response of one variable when another variable changes.

The statement in the question describes a study, so it describes a scientific branch. How individuals and societies choose to use scarce resources at their disposal is the subject area of Economics. The needs and desires of individuals are unlimited. Therefore, satisfying those needs and desires requires the production of goods and services. This is what Economics tries to analyze and find solutions to. To put it more clearly, economists study the whole process of the allocation of society’s scarce resources between different goods and services needed by different sections of the society, and examine the effects of the government’s actions on the economy as a whole. The correct answer is B. 

Economic policy choices often produce similarly conflicting outcomes. Policymakers must therefore prioritize economic policy goals, or attribute different weights to desirable and undesirable outcomes from the introduction of various policies. In the case of the Phillips curve, for example, policymakers can tackle this tradeoff using various policy instruments: By changing the level of government spending or tax collection, and the quantity of money put in circulation, policymakers can, in the short run, influence the inflation and unemployment rate pairs. The correct answer is C.

Efficiency refers to the ability to put a given amount of scarce resources into use in such a way to produce the highest level of output that could be produced with the available production technology.

Demand is inelastic when the percentage change in quantity demanded is smaller than the percentage change in price. Inelastic demand always takes a value between zero and -1. Demand is elastic when the percentage change (decrease) in quantity demanded is larger than the percentage change (increase) in price. Elastic demand has anabsolute value greater than 1.

The theory of demand indicates that an individual’s decision about what quantity of a specific good to demand is determined by factors such as the tastes and preferences of the individual, the price of the good, the income of the individual, the price of related goods and services, the individual’s expectations about the future income, wealth, and prices, etc.

Consumers and producers act as if their actions are guided by an “invisible hand” leading them to desirable market outcomes. In the absence of interventions, markets usually work in a way to improve social welfare. The answer is C.

The price elasticity of supply is determined by the flexibility of producers/sellers to change the amount of the good or service they produce in response to price changes. The flexibility of producers depends on two important factors. These factors are the availability of inputs to producers and the time horizon. The higher the availability of inputs for production, the higher the elasticity of supply. For example, the supply of beachfront property in Istanbul Bosporus or Mediterranean coasts is harder to vary and thus less elastic than the supply of new cars or computers.

Scarcity arises from the limited nature of society’s resources compared to unlimited
needs and desires. Our resources are limited relative to our needs, and this is true not only for individuals but also for societies. Scarcity refers to the society’s inability to produce all the goods and services people desire to have because of deficiency of resources. Societies
therefore must also decide on their priorities and manage their resources accordingly with the priorities they set. The answer is B.

Given the limited budget available to them, consumers choose a combination of goods that will
maximize the satisfaction they can achieve. The maximizing market basket must satisfy two conditions:
It must be located on the budget line and it must give the consumer the most preferred combination of goods and services. The true answer is E.

Efficiency is getting more from a given amount of scarce resources. If production technique A allows for production of more goods than technique B without increasing the amount of inputs and energy used, for example, technique A is said to be more efficient than technique B. The answer is D.

Utility that the individual obtains from each additional or marginal unit consumed of a good declines, as more and more of
that good is consumed. The answer is D.

Goods with close substitutes tend to have more elastic demand than goods without close substitutes since it is easier for consumers to give up that good and switch to its substitutes.

Determinants of Price Elasticity of Demand-The Good is a Necessity or a Luxury for the Consumers?

Price elasticity of demand is also affected by how the consumers view a good or service a necessity or luxury for themselves. Necessities tend to have inelastic demand and luxuries tend to have elastic demand. Education and health services (doctor visits), heating in the winter, gasoline for car owners are considered necessities for consumers and these items have inelastic demand since the case of price increases in these items gets small reactions from consumers to cut their quantity demanded. On the other hand, for the items that is considered as luxury for the consumers, a price increase gets a substantial response from the consumers’ demand. Please notice that whether a good or service is a necessity or luxury is determined by the tastes and preferences of the consumer.

The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of that good falls. The answer is B.