ECS2601 – Microeconomics | University of South
Africa (UNISA) | Fall Semester 2025/2026 Updated
Study Pack | Verified Application & Exam Questions
with Correct Answers and Detailed Rationales |
Comprehensive Test Bank and Revision Guide for
Economics Students
Question 1:
What does "demand" refer to in economics?
A) The quantity of goods that producers are willing to sell
B) The quantity of goods that consumers are willing and able to purchase at various
prices
C) The total revenue of a firm
D) The cost of production
Rationale: Demand is a fundamental concept in microeconomics that reflects
consumer behavior.
Question 2:
What is the "law of demand"?
A) Demand increases as income decreases
B) As the price of a good decreases, the quantity demanded increases, and vice
versa
C) Demand is unaffected by price changes
D) Demand remains constant regardless of price
Rationale: The law of demand illustrates the inverse relationship between price and
quantity demanded.
Question 3:
What does "supply" refer to in microeconomics?
A) The total demand for a good
B) The quantity of goods that producers are willing and able to sell at various prices
C) The total cost of production
D) The market price of goods
Rationale: Supply is crucial for understanding how markets function and how prices are
determined.
Question 4:
What is the "law of supply"?
,A) Supply decreases as demand increases
B) As the price of a good increases, the quantity supplied increases, and vice versa
C) Supply remains constant regardless of price
D) Supply is unrelated to production costs
Rationale: The law of supply describes the direct relationship between price and
quantity supplied.
Question 5:
What does "market equilibrium" refer to?
A) When demand exceeds supply
B) The point at which the quantity demanded equals the quantity supplied
C) The highest price in a market
D) The lowest cost of production
Rationale: Market equilibrium is essential for understanding how markets clear and
prices stabilize.
Question 6:
What is "elasticity of demand"?
A) A measure of how much the quantity demanded of a good responds to a change
in price
B) A fixed value
C) A qualitative measure of consumer preferences
D) The total revenue generated by sales
Rationale: Elasticity of demand helps analyze consumer sensitivity to price changes.
Question 7:
What does "price elasticity of demand" (PED) measure?
A) The responsiveness of supply to price changes
B) The percentage change in quantity demanded divided by the percentage change
in price
C) The fixed cost of production
D) The total demand at various price levels
Rationale: PED is crucial for determining how price changes affect consumer behavior.
Question 8:
What is "cross-price elasticity of demand"?
,A) A measure of how the quantity demanded of one good responds to a change in
the price of another good
B) A measure of consumer preferences
C) The total revenue of a firm
D) The responsiveness of supply to price changes
Rationale: Cross-price elasticity helps understand the relationship between different
goods in the market.
Question 9:
What does "income elasticity of demand" measure?
A) The responsiveness of demand to changes in supply
B) The percentage change in quantity demanded divided by the percentage change
in consumer income
C) The total cost of production
D) The fixed price of a good
Rationale: Income elasticity indicates how demand for a good changes as consumer
income changes.
Question 10:
What is the difference between "normal goods" and "inferior goods"?
A) Normal goods are always expensive
B) Normal goods have positive income elasticity, while inferior goods have negative
income elasticity
C) Inferior goods are always in high demand
D) There is no difference
Rationale: Understanding the distinction between normal and inferior goods is
essential for analyzing consumer behavior.
Question 11:
What does "consumer surplus" represent?
A) The total expenditure on a good
B) The difference between what consumers are willing to pay and what they
actually pay
C) The total revenue of a firm
D) The cost of production
Rationale: Consumer surplus measures the benefit consumers receive from
purchasing a good at a lower price.
, Question 12:
What is "producer surplus"?
A) The total cost of production
B) The difference between what producers are willing to accept and the market
price they actually receive
C) The total revenue generated by sales
D) The quantity supplied at a given price
Rationale: Producer surplus indicates the benefit producers receive from selling at
market prices.
Question 13:
What is the "marginal utility"?
A) The total satisfaction from all units consumed
B) The additional satisfaction gained from consuming one more unit of a good
C) The fixed cost of production
D) The total revenue from sales
Rationale: Marginal utility is crucial for understanding consumer choices and behavior.
Question 14:
What does the "law of diminishing marginal utility" state?
A) Utility increases with every unit consumed
B) As a consumer consumes more units of a good, the additional satisfaction
gained from each unit decreases
C) Utility remains constant regardless of consumption
D) There is no relationship between consumption and utility
Rationale: This law helps explain consumer decision-making and demand curves.
Question 15:
What is "perfect competition"?
A) A market structure characterized by many buyers and sellers, identical products,
and free entry and exit
B) A market with few sellers
C) A market dominated by one seller
D) A market with differentiated products
Rationale: Perfect competition is a benchmark for evaluating market efficiency.
Africa (UNISA) | Fall Semester 2025/2026 Updated
Study Pack | Verified Application & Exam Questions
with Correct Answers and Detailed Rationales |
Comprehensive Test Bank and Revision Guide for
Economics Students
Question 1:
What does "demand" refer to in economics?
A) The quantity of goods that producers are willing to sell
B) The quantity of goods that consumers are willing and able to purchase at various
prices
C) The total revenue of a firm
D) The cost of production
Rationale: Demand is a fundamental concept in microeconomics that reflects
consumer behavior.
Question 2:
What is the "law of demand"?
A) Demand increases as income decreases
B) As the price of a good decreases, the quantity demanded increases, and vice
versa
C) Demand is unaffected by price changes
D) Demand remains constant regardless of price
Rationale: The law of demand illustrates the inverse relationship between price and
quantity demanded.
Question 3:
What does "supply" refer to in microeconomics?
A) The total demand for a good
B) The quantity of goods that producers are willing and able to sell at various prices
C) The total cost of production
D) The market price of goods
Rationale: Supply is crucial for understanding how markets function and how prices are
determined.
Question 4:
What is the "law of supply"?
,A) Supply decreases as demand increases
B) As the price of a good increases, the quantity supplied increases, and vice versa
C) Supply remains constant regardless of price
D) Supply is unrelated to production costs
Rationale: The law of supply describes the direct relationship between price and
quantity supplied.
Question 5:
What does "market equilibrium" refer to?
A) When demand exceeds supply
B) The point at which the quantity demanded equals the quantity supplied
C) The highest price in a market
D) The lowest cost of production
Rationale: Market equilibrium is essential for understanding how markets clear and
prices stabilize.
Question 6:
What is "elasticity of demand"?
A) A measure of how much the quantity demanded of a good responds to a change
in price
B) A fixed value
C) A qualitative measure of consumer preferences
D) The total revenue generated by sales
Rationale: Elasticity of demand helps analyze consumer sensitivity to price changes.
Question 7:
What does "price elasticity of demand" (PED) measure?
A) The responsiveness of supply to price changes
B) The percentage change in quantity demanded divided by the percentage change
in price
C) The fixed cost of production
D) The total demand at various price levels
Rationale: PED is crucial for determining how price changes affect consumer behavior.
Question 8:
What is "cross-price elasticity of demand"?
,A) A measure of how the quantity demanded of one good responds to a change in
the price of another good
B) A measure of consumer preferences
C) The total revenue of a firm
D) The responsiveness of supply to price changes
Rationale: Cross-price elasticity helps understand the relationship between different
goods in the market.
Question 9:
What does "income elasticity of demand" measure?
A) The responsiveness of demand to changes in supply
B) The percentage change in quantity demanded divided by the percentage change
in consumer income
C) The total cost of production
D) The fixed price of a good
Rationale: Income elasticity indicates how demand for a good changes as consumer
income changes.
Question 10:
What is the difference between "normal goods" and "inferior goods"?
A) Normal goods are always expensive
B) Normal goods have positive income elasticity, while inferior goods have negative
income elasticity
C) Inferior goods are always in high demand
D) There is no difference
Rationale: Understanding the distinction between normal and inferior goods is
essential for analyzing consumer behavior.
Question 11:
What does "consumer surplus" represent?
A) The total expenditure on a good
B) The difference between what consumers are willing to pay and what they
actually pay
C) The total revenue of a firm
D) The cost of production
Rationale: Consumer surplus measures the benefit consumers receive from
purchasing a good at a lower price.
, Question 12:
What is "producer surplus"?
A) The total cost of production
B) The difference between what producers are willing to accept and the market
price they actually receive
C) The total revenue generated by sales
D) The quantity supplied at a given price
Rationale: Producer surplus indicates the benefit producers receive from selling at
market prices.
Question 13:
What is the "marginal utility"?
A) The total satisfaction from all units consumed
B) The additional satisfaction gained from consuming one more unit of a good
C) The fixed cost of production
D) The total revenue from sales
Rationale: Marginal utility is crucial for understanding consumer choices and behavior.
Question 14:
What does the "law of diminishing marginal utility" state?
A) Utility increases with every unit consumed
B) As a consumer consumes more units of a good, the additional satisfaction
gained from each unit decreases
C) Utility remains constant regardless of consumption
D) There is no relationship between consumption and utility
Rationale: This law helps explain consumer decision-making and demand curves.
Question 15:
What is "perfect competition"?
A) A market structure characterized by many buyers and sellers, identical products,
and free entry and exit
B) A market with few sellers
C) A market dominated by one seller
D) A market with differentiated products
Rationale: Perfect competition is a benchmark for evaluating market efficiency.
