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Class 12th – Subject: Microeconomics
Chapter 6: Terminology (Important Q&A)
Q1 What is Microeconomics?
Ans. The branch that studies the behavior of individual consumers, producers, and firms.
Q2 What is the meaning of Demand?
Ans. The quantity of a commodity that a consumer is willing to buy at a specific price.
Q3 What is Effective Demand?
Ans. A desire backed by purchasing power is called effective demand.
Q4 What is a Demand Schedule?
Ans. A table showing the quantities demanded at various different prices.
Q5 What is a Demand Curve?
Ans. A graphical representation of the relationship between price and demand.
Q6 What does the Law of Demand state?
Ans. Demand decreases when prices rise and increases when prices fall, ceteris paribus.
Q7 What is Exceptional Demand?
Ans. A situation where demand increases even when the price rises.
Q8 What is a Giffen Good?
Ans. A low-quality good whose demand increases as its price increases.
Q9 What is the Substitution Effect?
Ans. The change in consumption patterns due to a change in the relative prices of goods.
Q10 What is the Income Effect?
Ans. The effect on real income caused by a change in the price of a commodity.
Q11 What is Elasticity?
Ans. The sensitivity of one variable to a change in another variable.
Q12 What is Price Elasticity of Demand?
Ans. The responsiveness of demand to a change in price.
Q13 What is Perfectly Elastic Demand?
Ans. An infinite change in demand due to a very small change in price.
Q14 What is Perfectly Inelastic Demand?
Ans. No change in demand regardless of the change in price.
Q15 What is Supply?
Ans. The quantity that a seller is willing to sell at a specific price.
Q16 What is the Law of Supply?
Ans. Supply increases as the price of a commodity increases.
Q17 What does a Supply Curve show?
Ans. The direct relationship between price and supply.
Q18 What is Production?
Ans. The creation of goods and services.
Q19 What is a Production Function?
Ans. The relationship between physical inputs and physical output.
Q20 What is the Short Run?
Ans. A period in which some factors of production remain fixed.
Q21 What is the Long Run?
Ans. A period in which all factors of production are variable.
Q22 What is Total Product (TP)?
Ans. The total volume of goods produced by all units of a factor.
Q23 What is Average Product (AP)?
Ans. Output produced per unit of a variable factor.
Q24 What is Marginal Product (MP)?
Ans. The additional output produced by using one more unit of a factor.
Q25 What is the Law of Diminishing Returns?
Ans. Marginal product decreases as more units of a variable factor are added.
Q26 What is Cost?
Ans. The expenditure incurred on the production of goods.
Q27 What is Fixed Cost?
Ans. Costs that do not change with the level of production.
Q28 What is Variable Cost?
Ans. Costs that change directly with the level of production.
Q29 What is Total Cost?
Ans. The sum of Total Fixed Cost and Total Variable Cost.
Q30 What is Marginal Cost?
Ans. The cost of producing one additional unit of output.
Q31 What is Average Cost?
Ans. The cost per unit of production.
Q32 What is Revenue?
Ans. The income received from the sale of goods.
Q33 What is Total Revenue?
Ans. Price multiplied by the quantity sold.
Q34 What is Marginal Revenue?
Ans. Additional income received from selling one more unit.
Q35 What is Profit?
Ans. The difference between Total Revenue and Total Cost.
Q36 What is Normal Profit?
Ans. The minimum profit required to keep a business running.
Q37 What is Supernormal Profit?
Ans. Profit earned over and above the normal profit.
Q38 What is Perfect Competition?
Ans. A market structure with a large number of buyers and sellers of a homogeneous product.
Q39 What is Monopoly?
Ans. A market situation where there is a single seller of a product.
Q40 What is Monopolistic Competition?
Ans. A market with many sellers offering differentiated products.
Q41 What is Short-run Equilibrium?
Ans. A firm's profit balance within a limited time period.
Q42 What is Long-run Equilibrium?
Ans. A situation where firms earn only normal profits in the long run.
Q43 What is Consumer Surplus?
Ans. The difference between what a consumer is willing to pay and what they actually pay.
Q44 What is Producer Surplus?
Ans. The difference between the actual price received and the minimum acceptable price.
Q45 What is Market Equilibrium?
Ans. A state where Market Demand is equal to Market Supply.
Q46 What is Equilibrium Price?
Ans. The price at which quantity demanded equals quantity supplied.
Q47 What is Excess Supply?
Ans. A situation where supply is greater than demand at a given price.
Q48 What is Excess Demand?
Ans. A situation where demand is greater than supply at a given price.
Q49 What is Price Control?
Ans. Legal fixation of prices by the government.
Q50 What is the main objective of Microeconomics?
Ans. To study the efficient allocation of scarce resources.
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